But there isn't any major app on iOS that isn't on Android. Can you give an example?
Apple has a handy "Exclusives" section if you'd like to browse the iOS-only apps. Not knowing which are iOS-only due to marketing, and which are due to the developers not wanting to target Android, I won't list specifics.
I did browse through the Play Store a bit though, and while most apps seem to require 2.1 or 2.2 as a minimum, I did see at least one needing 2.3.3 (PvZ) and there are a number that show "varies by device" as the minimum OS version. Not sure what that exactly means, though. Tablet+phone combined apps? Tablet-specific apps seem to require 4.0 as a minimum.
Does having to continue to support 2.1 and 2.2 hold back apps any? Play Services and Support Library can help, but the apps don't get to enjoy the latest Application Framework.
And I think it's been stated that the idea that there is "a lot" of fragmentation is not accurate. Not where it really matters.
Obviously Android is doing well. Also obviously, there is more fragmentation in the Android realm than iOS - and of course it's not stopping the success of Android. Whether somebody considers the level of fragmentation a "lot" is up to that person's personal opinion. Whether a developer considers the level of fragmentation when they decide on which platform(s) to target is up to that developer.