I got my free [after mail-in rebate educational discount with the purchase of a qualifying mac] iPod Touch in the mail yesterday after deciding not to get an iPhone due to insane pricing and a 3-year contract. I love my iPod Touch. I can see why people love their iPhones.
If the cost of an iPhone is too high for you, as it was for me, do yourself a favour and look at the iPod Touch. The "Remote" app alone is a reminder of the awesome hardware and software Apple can put together.