[twoodfin]

The biggest challenges were being extremely energy efficient to get acceptable battery life out of a tiny battery, and being extremely data efficient to get acceptable costs from expensive cellular carriers.

I'd reword your first challenge as moving what had been theretofore a desktop OS onto a handheld device with acceptable performance/power consumption. Once that was done, it provided massive leverage for Apple over any of their competitors due to the maturity and flexibility of their toolchain, as well as a wealth of developers both inside and outside the company who could exploit it.

[mikeash]

It's both. They shrank their OS down to fit on a handheld device, but they also massively expanded what a "handheld device" could do. After the iPhone was announced, RIM supposedly couldn't figure out how Apple could possibly be doing all this fancy stuff and still have acceptable battery life. The answer, of course, was that they just made a gigantic battery. Amusing post about it here:

http://www.edibleapple.com/2010/12/28/rim-was-in-disbelief-f...