The iPhone is a different beast than most other products on the market. While it has the capabilities of a multi-media device (iPod), gaming machine, notebook, phone, camera and countless other devices it really doesn’t fully replace most of these devices for most people. It is the ultimate jack-of-all trades, and people love to carry it around to suit their needs as they change on the fly but when they want something to fill a certain need they go to the dedicated device.
In terms of games this means that the Nintendo DS will probably lose some game sales to the iPhone but (in my opinion) these will most likely be the quick pick-up-and-play games that are enjoyable in 5 minute bursts. On something like city transit, you will see the super-ultra-casual gamer pull out their iPhone to play a Tetris-like game while people who are more interested in gaming in general will probably go to the Nintendo DS, PSP, or the upcoming 3DS.
