I was lucky enough to unbox a G1 yesterday. Pretty neat phone, it doesn't outshine the iPhone in my opinion, but it's a great device. Definitely 100x better than any other phone out there (minus the iPhone).
But what makes the G1 great is the apps that take full advantage of *everything* the handset has to offer. Wikitude (worst name ever for the coolest app I've seen to date). Just watch the video.
It doesn't really give the same effect as standing on the 9th floor in a Qualcomm building looking out over the mountains towards Phoenix – seeing your field of view populate with POIs in the area for miles around, but it gives you a pretty good idea… More info/background on Wikitude is available here.
What's clear is that Android is going to be a serious contender- and is a fully functional Battleship.