I don't own an iPhone, and I don't own an Android phone.
Android kicking the iPhones ass was a hyperbole, but I do believe that the business model of the Android is better in the long term. In a few years there are, with a little luck, 10-15 different Android models, and just a few variations on the iPhone.
Variation, options and non-vendor-lockin are good selling points.
I would also challenge that notion and say that limited choice is why there has been a surge in Apple's popularity while Dell/HP struggle to keep their cards in order. I'd also reference the US automotive industry as another point of failure with too much choice. For success stories, look at the gaming industry and what closed-platforms (Xbox, PS3, Wii.) has done for it. While it still costs a lot of money, developers are not losing money on warez, or fighting the pains of QA across 1,000,000's of hardware configurations.
Apple is a consumers line of technology... and thanks to open-platforms in the 90s/00s, hardware is now practically a commodity. 90% of the smart phone buyers don't give a shit about choice... they just want the best.
Additionally, <puts on monkey suit> Developers! Developers! Developers! What I love about Apple is that a small team can launch a product (worldwide, 75 countries, 7 currencies) and not be burden by QA/hardware configurations. Not to mention, how many millions of customers already have their credit cards on file? Millions of devices. Millions of consumers.
As soon as the Android is available on 20 different configurations, indie developers will struggle and teams of 5-15 will be required to ship a product accessible by the entire Android market.
It's the variation and options that really drove Linux to the desktop during the 2000's. Everywhere I go, people ask me, disappointedly, why there are only half a dozen filesystems to choose from and expressing their sadness that a mere week of experimenting will do to pick between KDE/Gnome/fvwm/blackbox/etc.
(You did note the recent news that Apple passed RIM (Blackberry) and Motorola to become the second most popular smartphone make, with just two the two very similar iPhone models?)
Does this apply with the cell phone handset market? A market that has been trained, from the beginning, based on differentiation of both crappy hardware and crappy software options AND on the lack of true portability of data and apps? It becomes easier to test out new hardware without having to test out new software and lose all your data (contacts, content, apps) at the same time. People seem to instantly get "If someone doesn't like the address book on an Android phone, there's at least the capability to replace it with something else that someone else wrote" (I think people see the value in this because the address book functionality on handsets is, in general, REALLY crappy) -- this feature has not existed, short of potentially second class Java apps that are difficult to acquire and install, on any other handset previously.
The variations and options of Android will appeal to people who did not previously consider themselves to be members of the smart phone demographic. Android has the potential to put a smart phone in the hands of these people. And this market is, ultimately, larger than the potential iPhone market, what with more hardware and service vendors.
Android kicking the iPhones ass was a hyperbole, but I do believe that the business model of the Android is better in the long term. In a few years there are, with a little luck, 10-15 different Android models, and just a few variations on the iPhone.
Variation, options and non-vendor-lockin are good selling points.