It was the first phone with multi-touch.
It wasn't the first phone design shown off with multi-touch, but it was the first phone actually sold with it.
Though I don't know why people cite multi-touch itself as important, since that wasn't its real attraction. The smooth finger-friendly UI was. Such UIs had also been done before, but never as attractively.
You are aware that iPhone made Google go back and redesign Android completely right?
Not really. They probably added inertia scrolling. Otherwise, the UI basics didn't change. They kept the Back and Menu buttons. They kept widgets. They kept customization. They kept multitasking. They kept support for third party apps. That was all quite different from iOS.
That's because Android was being designed as a Windows Mobile competitor (Google was afraid of Microsoft controlling the mobile search market), and thus was always going to build in support for both non-touch and touch devices. The Android group even used a known model of a Windows Mobile phone for development. (Only ignorant bloggers thought it was a Blackberry clone.)
The iPhone debut did, however, understandably put the nail in the coffin of any idea of selling their non-touch version first, as originally planned. That's what Rubin meant by "I guess we won't be selling THAT phone."
Yeah, I find that funny considering Google and Android phones wouldn't even exist in their current form without iPhone.
That's true, but not in the way that you're probably thinking.
If Apple had continued to stay out of the phone market, I think we'd have a far greater variety of popular phone form factors. E.g. more emphasis on functionality, ruggedness and battery life, instead of on a glamorous and ever thinner slab.
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As for pen support, I've been saying for years that it's just a matter of time before Apple adds it. It's way too useful to ignore it just because of some old marketing phrases Jobs once used. (He also said we'd need to sandpaper our fingers to use a smaller tablet. Oh well.) Perhaps more importantly, Cook has shown that he will do anything to take away Android market share, by providing similar sizes and functionality.