This is the phone market, nobody stays on top forever. Think motorola razr that dominated for years but people like change. Android has a great chance particularly when things get cheap. How will the iPhone and iPad compete with devices that only cost £50 - £100? We've seen with netbooks that people will go with cheap products and android is basically going to give the cheapest brands on the planet a good os for their hardware.
the problem with the cheap Android idea is that the OS does not support it. The term phone is slightly misleading - the iPhone and the iPOd touch are computers, with full internet capability and an SDK. They have all kind of apps. One of those apps on the iPhone makes calls over the traditional carrier network. On the iPod touch Skype can do the same over wifi. Other apps do other stuff.
Android 3.0 needs this kind of power:
Minimum hardware requirements for Android 3.0 devices are: 1GHZ CPU, 512MB or RAM, displays from 3.5” and higher.
Thats what competes with the iPhone from now on. It wont be cheap. Developers wont care about the rest, which will be running versions of 2.2/2.1.