Steve Jobs has always thought of computing as being best implemented via separate "appliances", going back to his analogy of the first Mac to a toaster. Well some twenty plus years later he is realizing his dreams of multiple portable appliances. First the iPod, now the iPhone; what next in 2007 and 2008? More and varied ultra-portables? There is a demand for (but absence of) this in the Mac product lineup of sub-notebooks and tablets. Specifically, state of the art devices which use the available technologies in iPhone including the advanced multi-touch interface and flash drive storage, as well as software innovations borrowed from Leopard such as iPhone's stacked layers of fully multitasking applications or desktops linked to the top layer of buttons or docks as they are known in Leopard. Include a state-of-the-art, light-weight Organic LED screen that is flexible and can be viewed from any angle in broad daylight and there is great market potential for Apple to create "post PC" devices.
I wrote about the WWDC announcements in an earlier analysis here so I won't repeat it, but if one looks at the features of Leopard and what happened at WWDC, it appears that Leopard, with its multitasking Spaces, Stacks, Coverflow and Quick Look, is ideally designed for the small screen.
Apple is playing to its strength in portables and now handhelds. Even Safari, offered free for Beta testing to Windows users, may have been introduced early to test the metal of its security. So fire away hacks and security experts--you're helping to make Safari bullet proof and safe for iPhone and things to come. The latest news is that iPhone supports reading Excel and Word documents--probably the Quicklook feature ported from Leopard. However, some market analysts see the iPhone as a innovative smart phone with security problems, at best.
But Apple is already committed to a two year period of auto-updating iPhone's OSX based software, its compatibilty to common communications and security for mainstream use. In this, iPhone is closer to ultra-portable OS based tablets than to smart phones. I can already imagine college dorm rooms in which friends gather to stream YouTube videos or recent trip photos from their 11 inch, $500 Apple Student tablet to the resident's Apple TV for common viewing and merriment. Of course they will carry the tablets to class, too.
Disclosure: Author has a long position in AAPL