My wife and I fight over it. She for games (Plants v. zombies, Super 7, etc.) youtube, and magazine reading; I for ebooks/pdfs, surfing, and listening to Podcasts (thanks to the HNer who recommended "A Life Well Wasted" podcast, friggin' brilliant) and NPR before bed. We both use it to stream our episodes with Air Video during mealtimes.
When I was on vacation back in June, I was floored that I needn't even take my laptop with me. An iPhone and iPad was all that was required (the iPhone was the GPS, too), and we could plot out stuff to do, read restaurant reviews, and check with work stuff all without feeling like "work", if you can understand that.
It's like the mythical "third place" of computing technology. That thing between the little smartphone and the big smart computer: A "smart" thick client, a mainline into exactly what you need. Even the fact that it doesn't do multitasking (yet, but even when it does, not really) makes you focus on what it is you're doing at the time, stopping "wikidiction" and other time sinks that persist when using a computer and all its multitasking splendor (and horror).