I've noticed a curious word usage on the Internet; the discussion of iPhone "applications". As in, "iChess is a great iPhone application" or the iPhone "can do mass storage and IM with help from other apps right now."
It's still awfully early, but there are already a lot of iPhone webapps out there. What's emerging is an iPhone webapp has a page that looks good at 320x480, automatically navigates to an internal anchor to scroll the viewport past the address bar, uses iPhone style graphics and fonts. And most importantly, loads a lot of content in a single page so you don't have to keep going to the slow network. The Digg iPhone page is a good example of these principles.
I'm delighted there are good webapps on the iPhone. But they are not real iPhone applications. They can't access the cell phone, or SMS, or your music, or the camera, or your contact list, or your notes, or your calendar, or your photographs. They're just web pages. Users should demand better from Apple for their $600 phones.