It was inevitable.
With the onset of new developments and capabilities which make the Apple iPhone and iTouch the continuously popular deveices that they are, it would only be a matter of time before their individual sets of technoligies began to overlap. Afterall, with todays technology, there are only so many apps and software "gadgets" that one can squeeze into a device.
Portability being what it is, it seems that people have learned to adapt themselves to any limitations that the i-devices have. I know of folks who keep their iPhones and iTouches plugged into USB ports at the office because of battery issues that come with heavy use. Rubber sleeves seem to ward off the dreaded "iPhone antenna signal problem" that was such a big story months ago. In the big picture though, the i-devices seem to make people happy while making Steve Job's wallet fatter.
At any given moment in technology time, there exists just a limited number of applications and programs that make an electronic gadget as novel as it is. Cellphones have become smartphones because of applications. Netbooks, the once touted "laptop killers" of the world, are now held back by their lack of ability to handle advanced programs and apps. And now, even console game systems like the XBox360 and PS3 and becoming app friendly devices which enable movie watching and other internet-related tasks.
So, aside from the obvious mode of the iPhone to act as a phone, where does it stand when compared to the iTouch? My son has an 8GB generation 1 iTouch, and being the technogeek 15-year-old that he is [not that being a technogeek is an insult anymore], he has all of the advanced apps and updates which converted his device into a wi-fi powerhouse. He can make phone calls using Skype, surf the net, send emails, and play tons of games. He can do [almost] as much as I can on my Toshiba T135 ultraportable (neither my laptop nor his iTouch have CD drives). So the "reach" of the iTouch even begins to see overlap with full size laptops. This is a great example of how a consumer device can evolve while in the hands of its users. As a product designer, I can say that one never knows how great [or how bad] a product can be, until they get it into the hands of their end user.
Though personally not an Apple device user, I can say that after seeing the iTouch and iPhone in action, I've been very impressed. Not so much by how the devices work, but by how readily Apple's users adapt to the products, for better or for worse. This gives Apple's products the "Teflon touch" made famous by former president Ronald Reagan. Nobody remembers him for anything bad that he did, and his history remains relatively untarnished.
As the holiday season now approaches, I'm sure the new iTouch and iPhone will be on the minds of a LOT of people. The question then becomes - how does one choose one over the other?
I'm sure Steve Jobs' answer wouldn't surpise you - "heck, just get 'em both"...