Look at this comparison: http://gizmodo.com/5053717/how-the-t+mobile-g1-stacks-up-to-its-frienemies
The price is not that much lower than the iPhone 3G (and both require a two year commitment with a data plan)
The G1 has these issues (mainly compared to the iPhone)
• Not as sleek as the iPhone G3 because of the keyboard
• The gPhone UI looks crappy and sluggish
• Only 1 GB of memory and that is from the mini SD card (it has no internal storage). It's nice that you can add memory via a card, but still...
• The iPhone has been out longer, has more applications
• No multi touch screen like the iPhone
• Most people already use iTunes over Amazon and have an established account
• iPod accessories i.e. speakers, cases are plentiful and cheap
• T-Mobiles G3 network is not as fast and they limit your data like many other plans. I think they have upped their super low limit. Need to read more...
• T-Mobile service is spotty, though AT&T might suck too. In some areas, T-Mobile has to piggy back off AT&T's network too.
• No desktop software information sync, Google holds all your data. Privacy and security?
• It’s all plastic, so probably looks like shit in real life and will wear easily
• Doesn’t use the same earbud cable as the iPhone and the rest of the world (requires separate purchase) (It uses mini USB and not 3.5 mm)
• No Exchange support, so no work email on it.
• You can only use one Google account for the services, and you have to factory reset to clear that account!
• Flash is the only video play back format
The only read “advantages” being
• Signs you into all your Google services through one account
• Syncs all your info on Google servers (I’d just assume have Microsoft Outlook be my hub thanks)
• “Full size” keyboard
• May be easier to replace the battery over the iPhone
Some other good info: http://gizmodo.com/5053747/android-and-t+mobile-g1s-five-most-obnoxious-flaws
Update: Items I with both phones had
• The SIM card wasn't locked to it's carrier
• It can't be used as a tethered modem
• Won't play any music with DRM. I'm pretty sure the iPhone supports Apple's Fairply