We're just going to come out and say it: the iPhone has the most beautiful industrial design of any cellphone we've ever seen. Yes, it's a matter of taste, and while we imagine some won't agree, we find it hard to resist the handset's thoughtful minimalism and attention to detail.
The edges of the beautiful optical-grade glass facade fit seamlessly with its stainless steel rim; the rear is an incredibly finely milled aluminum, with a hard, black plastic strip at the bottom, covering the device's antenna array, and providing small, unsightly grids of holes for speaker and mic audio. On the rear is the slightly recessed 2 megapixel camera lens, a reflective Apple logo, and some information about the device (IMEI, serial, etc.) in nearly microscopic print. (Sorry, iPhone engravings don't seem to be available yet for online customers.)
The iPhone's curves and geometry make it incredibly comfortable to hold. It fits well in the hand horizontally and vertically (completely one-handed operation is a snap in portrait mode), and its slim profile lets it slip into even a tight pocket with little effort. The device feels incredibly sturdy and well balanced -- no end seems any heavier than another. Every edge blends perfectly with the next (which will probably help fight gunk buildup over time), and holding the device to one's ear is comfortable enough, although not as comfortable as, say, the HTC Touch.
Our only real complaint with the device's design isn't one we take lightly: Apple went to the trouble of giving the iPhone a standard 3.5mm headphone jack, but the plug is far too recessed to use most headphones with -- we tested a variety, and were highly unimpressed with how many fit. What's the point of a standard port if it's implemented in a non-standard way? Apple might have at least included an extender / adapter for this, but didn't. Luckily, the iPhone earbuds sound very decent, and also include a minuscule, clicky in-line remote / mic -- but that's not going to alleviate the annoyance for the myriad users with expensive Etys or Shures who have to pay another $10 for yet another small part to lose.