I own an iPhone 3GS, overall it's a good phone but it has its issues. The underlying OS is very stable in normal usage, and it rarely crashes.
Exchange integration is excellent - email, address book and calendar all work seamlessly.
The interface is well designed and easy to navigate, in comparison with other phones (e.g. Nokia E-series).
The built in web browser is excellent, yes you can get other browsers like Opera mini for non smart-phones but it doesn't compare, quite a few websites' functionality appeared broken on Opera mini esp. with job app sites.
Apps are plentiful and there is pretty much an app for everything.
There are some negatives, however.
Battery life is one of them - medium to heavy use, expect the battery to be drained by the end of the day, or before.
Using iTunes (this one is subjective). I personally hate iTunes, as it is an overly bulky piece of software on Windows (as it installs lots of other junk on the PC). If, like me, you don't use iTunes as your music player and have lots of other exotic lossless formats that aren't supported by iTunes/iPhone.
There's also not enough options in iTunes - want to save youe iPhone backup on another drive? Hardly an unreasonable request, if you don't fancy filling up your hard drive with a backup. Simple answer is, you can't... without having to hack the NTFS file system using command line tools, when a simple option in preferences (or regedit) would've sufficed.
When there's a problem, recovery can be a painful process. Currently I am experiencing problems with my iPhone's battery draining quicker than normal, and upon taking it to the store they suggested going to wipe the entire phone before they'd do a replacement, and suggested that one of the apps might be at fault, corrupting something or another and so causing the battery to drain. It's plausible - but again, there's no option to just back up the texts and settings and wipe everything else?
The camera's rubbish at night time - well, to be honest, all cameras on phones tend to be rubbish anyway, even moreso if they don't have a built in flash. To whoever said the iPhone has a 5Mp camera and the LG has an 8Mp camera, the amount of megapixels isn't the be all and end all - the optics and sensor size matter too.
I've got a Nikon D40 digital SLR camera (positively old in camera years), and it's only 6 megapixels, but its image quality would beat the pants off any mobile phone camera out there.
All of the above is based upon my personal experiences - I certainly don't have an "iPhonez iz teh b3st!!1!" attitude.
I think Apple's marketing machine has a tendency to make people look at Apple products with rose-tinted spectables, as if it's something that will never break down, have technical problems etc.