The iPhone 3GS is not an insignificant step forward in the iPhone family. The Nike+ support, magnetometer (compass), video recording, voice command, better camera, better battery life and faster data network are all improvements nobody would call a step backwards. But the biggest day-to-day improvement over the 3G is undoubtedly the increased processing speed, which is why Apple called this phone the 3GS (with the S standing for super fast) in order to designate that it's basically the 3G, but better.
3G users have the unfortunate question of asking themselves whether or not they want to spend the $399/$499 to upgrade to the 3GS right now. If you're eligible to upgrade in July, August or September, AT&T's letting you do so at the full subsidized $199/$299 price. If not, you'll have to wait until your 18 months are up. It's definitely a better phone, but AT&T's plan of making early adopters wait another six months from now until they can get the standard $199/$299 price is frustrating, since we'll already be halfway into the iPhone 3GS lifecycle. And by then, it'll be worth waiting until June 2010 for a true revolutionary jump in iPhone design, instead of just an evolutionary improvement on the 3G.
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