Apple knew as they were releasing the iPhone that the iPod Touch was on the way. Since the feature set of the iPhone and the iPod are so similar (minus the camera and the phone, basically), Apple would have a hard time pricing the two devices too far apart from each other. While the iPhone apparently was worth the premium for a lot of people, in the DAP market no one's going to shell out $500 for an mp3 player. Ultimately Apple will sell more iPods and more iPhones with the price drop.
On one hand, I see it as a tactic to make the iPhone appear more affordable for Christmas. "Wow, 400 bucks is nothing compared to 600 bucks".
On the other hand, it will alienate the people who did buy an iPhone at launch (I feel bad for the guy who bought his 16 days ago). They paid $200 extra to get an iPhone 2 months in advance. That's $100 bucks a month; do you think that's worth it? Many people will This no and feel screwed over by Apple.
