I sell it to you telling you it's an Apple iPhone, and the box says it's an Apple iPhone, but it's not an Apple iPhone. That's how counterfeiting works. It's a convincing fake that was sold as if it was the real deal.
I am curious - why can't someone make a true knockoff of the iPhone, a hackiPhone, if you will? Build something that looks like a real iPhone using off the shelf parts, then install iOS on it (possibly modified to boot without some missing parts that you couldn't find off the shelf.)
There's a market for Hackintoshs (non Apple computers that run OS X); why not the same thing for iOS?
There's no legal market. The last time someone tried to commercially sell non-Apple computers with MacOS X installed, they were convicted to pay $2,500 per computer sold for DMCA violation (not that it mattered because they went bankrupt anyway). In the case of iOS, I think there is some serious protection going on.