The scroll wheel. Every other player was a 'techie' device back then. I had a couple other MP3 players at the time; the entire experience from loading songs onto it to navigating around the UI with awkward buttons was annoying at best.
The iPod's simple UI, coupled with easy iTunes integration, made it head and shoulders above the rest... though the first few iterations were quite expensive compared to the competition.
It also came after iTunes, and would just basically sync your entire iTunes library (few people had more than 5GB music back then) including artist, song title, etc. in mere minutes (over FireWire). It had amazing ease of use, and a great UI.
The iPod's simple UI, coupled with easy iTunes integration, made it head and shoulders above the rest... though the first few iterations were quite expensive compared to the competition.