Several Things
1. I type at 25 words per minute on the iPhone's keyboard. I can't beat that on a physical miniature keyboard. However, if you have long nails or are overweight or otherwise have big fingers, then you have a legitimate concern with the on-screen keyboard.
2. The Droid ads are targeting the 5% of the population who are geeks like us with statements like "iDon't multitask" and "iDon't have widgets". Most people will find those ads confusing, and confusing people usually doesn't create sales. I wonder if these ads were created by using a focus group of computer geeks.
3. The iPhone's main advantage is its applications, and the main reason for that is the stable, consistent platform for those apps. Developers not only have a rich and growing set of APIs, those APIs are for hardware with exactly the same screen dimensions and resolutions. Conversely, it's much more difficult to develop attractive, usable applications for small screens when the screen dimensions change. (On a computer screen, most applications have a minimum resolution and are relatively unconstrained by screen space.)
4. There have been a lot of iPhone competitors: T-mobile's G-phone, the Blackberry Storm, the Pre, some other minor ones, and now this. None have made a dent. That's because they copy parts of the iPhone's form factor but don't copy the iPhone's business model. Instead they add features that sound good but end up slowing the device down or making it confusing to us. They also fail to provide a consistent platform. Pre is releasing the Pixi, which just clouds the waters and lets developers know that everything is always going to be changing. If the competitors want to copy Apple, they should build a consistent platform provides great developer tools while still protecting core functionality. For example, the Pre multitasks, but it slows to a crawl without a geek to manage it.
