Where is this pic of this iPhone? This is just the software interface...
The UI shown in the video was probably displayed on just a touchscreen attached to development boards. Something like the mostly off-the-shelf tablet development system that was used in 2005 to demo the multi-touch beginnings of the iOS GUI:
Case designs were done separately, since no hardware could fit them (yet).
With the first iPhone being launched in 2007 and 3 years in the making that must have been approx 2004 (I'd guess even before) and one of the very first prototypes from apples "Project Purple" amazing what apple achieved in those 3 years.
It was even quicker than that, unless we count just talking and thinking about it.
Although Jobs talked with Cingular about doing a phone in early 2005, Apple didn't get serious about development until mid 2005, coincidentally around the time Google bought Android. That's when they started making the iPod based version. (It's also when Apple approached Verizon, with absolutely nothing to show them except a vague idea and some odd marketing ideas. Verizon politely turned them down. Even Cingular didn't sign on for another year.)
The competition between the iPod clickwheel and the OSX touch based version came later in 2005, with the decision taking place near the end of the year. Project Purple 2 ramp up and the development of iOS started at the beginning of 2006.
It was not until mid-2006, about six months later, that Cingular (AT&T) finally signed a contract for the iPhone. They got a multi-year exclusive, partly in return for delaying the carrier's 3G build out, to instead beef up the speed of their 2G EDGE network for the iPhone. (By then most other smartphones had 3G.)
Also in mid 2006, Jobs invited Google's Schmidt onto the Apple board, no doubt partly because he wanted to pull Schmidt away from supporting the Android effort, and partly because Apple needed Google's services.
With Schmidt's help, Apple and Google engineers secretly met over Halloween 2006 to hammer out new APIs so the iPhone could display Google search, maps, etc. (Later, the GPS-less iPhone added Google's 2G/WiFi locating service, and YouTube videos were converted so the iPhone could play them. Jobs' first demo would've been a lot less impressive without Google services.) The Apple engineers were shocked that the Google engineers showed up in costume, btw
By Thanksgiving 2006, iPhone prototypes were still very unstable and at one meeting Jobs softly told his staff that they had no product yet. His unusually quiet tone frightened everyone far more than his regular yelling, and they redoubled their efforts. By mid December they were able to show the Cingular CEO a semi-working model. Here's the hardware test version of iOS from November 2006:
Even though the iPhone still would not be solid enough to produce and sell until mid 2007, Jobs knew that other companies were also working on capacitive touch phones. If he wanted to guarantee credit for being first, he had no choice but to do a public demo before the big mobile phone show in Barcelona that was coming in February 2007.
So, armed with a dozen iPhone prototypes, each able to run just long enough to show one demo section, he cast aside his normal rule of total Apple secrecy and revealed the device in January 2007. (Luckily, competing development was further behind time wise than expected.)
As an aside, knowing that the below 2005 iPod-phone patent application would sooner or later be noticed, Jobs smartly made sure he was the first to mock it during his demo with that rotary dial iPod photo
