Here's the exact quote I would love to hear.. (and I'm not entirely sure why because I can't get the iPhone anyways).. regardless.
Steve: "You know, prices of components, processors, screens, memory... everything... are always going down and when we announced this iPhone way back in January we priced it at 499 and 599 for 4gb and 8gb models. Since then we've realized that those price and memory points are out of line with current prices so we had an option: reduce the price and keep the specs the same, or keep the price the same and bump up the specs. We discussed endlessly and came to decision that why not do both? That's why today I'm pleased to announce the iPhone will launch at 399 and 499 in 8gb and 16gb versions!"
Sorry for the length of it.. I'm at work and am bored... and tried to write it as Steve would say it.