Free software foundation (GNU project) has published a list of 5 reasons to avoid Apple iPhone 3G. According to article Apple puts so many restrictions on you including privacy and DRM limitations:
 iPhone completely blocks free software. Developers must pay a tax to Apple, who becomes the sole authority over what can and can't be on everyone's phones.
 iPhone endorses and supports Digital Restrictions Management (DRM) technology.
 iPhone exposes your whereabouts and provides ways for others to track you without your knowledge.
 iPhone won't play patent- and DRM-free formats like Ogg Vorbis and Theora.
 iPhone is not the only option. There are better alternatives on the horizon that respect your freedom, don't spy on you, play free media formats, and let you use free software -- like the FreeRunner.
Update: Checkout Top 10 reasons to hate the iPhone 3G (thanks pushpraj)