I think the main purpose of still making the 3G is so that Apple/AT&T can say "starting at $99." When "the average person" walks into Best Buy or an AT&T store and starts looking at phones, they pay attention to the prices. When they see that the Best Buy tag on the iPhone says $99 instead of $299, they stop and look at it more and consider it more. There are a lot of people that don't know anywhere what you and I know about cell phones and they walk into Best Buy, thinking "I want a phone that costs under $100," and that person only looks at phones that cost under $100. They might also ask the associate/employee "How much does the iPhone start at?" The employee can respond "$99." Now, the customer starts looking at the $99 iPhone and says "this is pretty cool." After the associate has them sold on the 3G, then they can tell them about the 3GS. Some people will say "I don't need that. The 3G is plenty for me," and they will buy the 3G. Some will get the 3GS. But without the $99 to start with, that customer would never have looked at the 3GS.
Also, not everyone has to have the "latest greatest" technology. There are millions of people that would be content with the 3G. My mom is one of those people. She loves my 3G and said she wants her own, but at the same time she said "I don't need the fastest model. The basic one will work fine for me."
Also, not everyone has to have the "latest greatest" technology. There are millions of people that would be content with the 3G. My mom is one of those people. She loves my 3G and said she wants her own, but at the same time she said "I don't need the fastest model. The basic one will work fine for me."