I always feel like I need to congratulate or somehow gift those readers who make it all the way through an article like this. Maybe I'll start handing out lollipops one day. If you made it this far you'll know that there's a lot of concluding that needs to happen.
First, the phone itself. Honestly, if you have the original iPhone then this is absolutely the one you'll want to upgrade to - you'll feel like you've been swept off of your feet one more time (assuming you did like your iPhone). Upgrading from the 3G is also a good idea in my opinion, just because of the tremendous increase in performance. Where the upgrade recommendation becomes stickier is if you have to pay full price for the phone. Unlike the iPhone 3G launch, AT&T isn't letting everyone move to the 3GS at the $199/$299 upgrade price (16/32GB models). Under immense pressure from the market, AT&T has made terms a little more favorable but there is a sizeable population that won't get upgrade pricing until later this year. At $500 or $600 I'm not sure the 3GS is worth the price today, simply because I'm expecting an updated model around this time next year. Remember that Cortex A9 based phones will be out in 2010 and Apple also has the option of using a multi-core A8 variant as well, especially at 45nm. If you have to spend that much money, either wait until the next iPhone or wait until your upgrade price drops; $500 can buy you a Core i7, it shouldn't be the cost of a CPU upgrade for your phone.
Next, there's the Palm Pre. I continue to be impressed by not only how much Palm was able to do in such a short period of time with webOS but how frequently Palm is updating the OS on the recently launched Pre. We're now up to four OS updates since its launch in June and I fully expect more from the Palm crew. By the time the Pre debuts on Verizon and AT&T the phone should be sitting pretty. If you don't mind being on the bleeding edge of a platform that needs work and real developer support, the Pre is a real alternative to the 3GS - and in some senses, a better device to use.
Finally, there's the hardware itself. The real story behind the 3GS isn't that Apple took longer than necessary to move to the Cortex A8. No, the real story here is that both ARM and Imagination Technologies are significantly improving the CPU and GPU performance in high end smartphone SoCs at a rapid pace. There's significant room for improvement in both CPU and GPU performance, right now all we're limited by is power consumption. Within the next year we should see more SoCs transition to 45nm and at that point I'd expect to see multi-core ARM implementations as well as wider PowerVR SGX cores. Then there's always ARM's Cortex A9, the first out-of-order ARM core. In the distant future we also have to start thinking about Intel; Atom was always intended for the smartphone market, and at 32nm I'd expect to see an Atom based CPU in an iPhone-sized device.
If you're bored by performance improvements on the desktop, then keep an eye on the ultra mobile space. Smartphones are going to see significant performance gains over the next few years. The iPhone 3GS is just the beginning.