You have to give AT&T and Apple marketing credit; they've managed to palm off a price increase as a discount. The headline is "$199 iPhone, half the old price". Then buried in the details is that the data contract now costs $10/month more, so over the two year lifespan of the phone it ends up being $40 more.
I know, I know, the new phone is more capable and the 3G network will be faster. Yeah, I want one too. But you have to admire the simple old carny marketing trick.
What I find most odd about the new price plan is it seems to bring the iPhone closer to AT&T lockin. I'd been hoping Apple would move away from a single carrier. I sure hope Android or something else provides some viable competition to the current market.