I'm going to be the minority and side with Apple here. Though the iPhone can't quite compete with the PSP or DS in games yet, there's a lot about it that makes it better.
Firstly, the DS can't really do anything but play games. OK, sure DSi can now connect to the web or whatever, but I think-- sorry, I KNOW iPhone is much better at surfing the web than a DS is. PSP has a fair few entertainment features, but again, how well do these features actually work? The internet on a PSP is slow. The music volume is just bad. I'd always rather have an iPod than listen to music of a PSP or DS. As for gaming, let's just be honest, iPhone's never going to beat PSP or DS. Why? Let's see.
"Apple outlined four things that make the PSP and DS worse for gaming: "No Multi-Touch user interface. Games are expensive. No App Store. No iPod."
But that's the thing, iPhone ONLY has a touch screen. Without additional controls you just can't keep gamers interested for long, let alone make a game immersive enough.
However that being said, PSP's and DS's games aren't that strong anymore.
Now that Nintendo are making "games for your mum" there's no point in even looking at what they have to offer on DS. As for the PSP, I've never found anything on there interesting. I think I'll stick to PS3/360.