My favourite in the iPhone series, costs way less than the iPhone 4, and it's only beaten by it in some trivial areas. If you're a user of iTunes, and an avid music fan then this is the phone for you. It's a good all around phone too though, and my favourite so far. Go iPhone 3GS!
Best smartphone OS - software is revolutionary and provides a stable platform. Sleek design. App Store is even greater revolution with the ability to add amazing functionality to the phone
Cons: Closed Source. Only one service provider - AT&T. Doesn't come unlocked. Bad reception in major US cities. Costly hardware and monthly plan. As compared to Android, no integration w/ Google services
Tons of third-party applications are available for free or for extremely low prices. Nice touchscreen, occasional (free) software upgrades. Many accessories available.
Cons: Long-term contracts in some regions -- 3 year contract + $199 phone in Canada.