Originally Posted by PB
As the others said, it must be a stripped down version of OS X. But does it really matters in the end? The message here is that the iPhone is a computer with unknown, at this time, processor and running its own OS and software.
I reckon it could easily be the full OS X as we know it but obviously missing some components like the Apache webserver, Automator etc. Despite an OS X install taking 15GB+, the system is just 1.8GB.
If it's based on Leopard (which you can expect with core animtion support) then it may be leaner anyway. I would guess you could get the full OS X system down to 500MB or less if you downsize all the graphics and remove all the frameworks and drivers that aren't necessary.
It would be interesting to find out if OS X apps will run on it without modification. I think that would be a big key to its success because it would make seamless transfer from office to being on the move.
Although it has 4GB, it has a card slot too I think so that is limitless memory as you can carry as many 8GB cards as you want.