This morning’s Observer column.

The significance of the iPhone – as regular readers know – lies in its operating system. It's really a powerful Unix computer that fits into the palm of your hand. That means it can run very sophisticated software – such as a browser that actually makes it feasible to read web pages and even books on a small screen. Add to this the fact that it is also permanently connected to the internet and you have what the rest of the industry is starting to recognise as a game changer.

Actually, the PC business is also beginning to wake up to the threat of the iPhone. How come? Well it turns out that iPhone users make less use of their laptops and desktop computers. The reason is obvious when you think about it: much of what we do on the net is pretty routine – checking email, accessing websites, Googling, accessing Facebook or Twitter. If you can do all that without booting up a computer, why bother?

The iPhone is also transforming the market for software…