I think it's a pretty complex situation, right now. Very tough to make a judgement call.
If you look at some of the latest Android phones out there - the Huawei 8220 (T-Mobile Pulse) which I currently own, at the low end, and the Motorola Milestone/Droid (which I covet but can't afford) at the high end, then from a hardware point of view these are clearly offering the iPhone stiff competition, and an open architecture. (the Huawei, for instance, offering pretty much the same capabilities as the iPhone, including capacitive touch screen, similar display size, GPS, magnetic compass etc, but for less than half the price, and no carrier lock-in).
Of the major competing mobile platforms - Symbian/Maemo/WebOS/iPhone/Android/Blackberry/ Windows Mobile, I think it's reasonably likely that Maemo and WebOS are going to find it hard to make traction in this market, and that Blackberry will carve out a specialist niche,not particularly attractive to most third-party developers, and that the remaining consumer market will split four ways between the remaining platforms. However, Nokia will have to make a tough choice and it may focus on Maemo and the high-end business market for smartphones with sophisticated requirements such as VPN support etc, where the line between phone and notebook computer blurs significantly. In this event Symbian, while still being a viable platform, will stagnate, with Nokia primarily betting on Maemo for the future. Microsoft seem to be fumbling with WinMo but it's too early to write them off just yet. They could also try the 'embrace and extend' trick with Android, but I think this might be too bitter a pill to swallow, for them.
Apple has made it very clear that it regards the iPhone primarily as a consumer device. However, it also has the advantage that it has almost succeeded in making the platform 'tamper-proof'. The latest boot roms are immune to the previous exploit that allowed jailbreaking, meaning that the latest generation iPhones, when rebooted, need to be re-jailbroken each time (what's known as a tethered jailbreak). Apple also now have a mechanism for preventing devices from having older versions of firmware reinstalled, and because each device - even iPod touches - has a unique serial number, at some point Apple can pretty much shut down the jailbreak sector. Besides, the glamour has faded now and the pioneer jailbreakers have moved on to other more interesting projects.
Why this is important is that Apple will soon therefore be able to offer a device which is provably secure and tamper-proof, which is important for a lot of commercial users. On the downside, installing Line of Business applications is a little more complex. You need to use Apple's Enterprise solution if you want to distribute more than 100 copies of your software, and this is not anything like as convenient as the Android marketplace or your own hosted application distribution server for in-company use.
Compared to Apple, Android developers can write much more capable software - services/daemons are allowed, there's no approval process etc. and you can set up your own competing app store if you wish etc. On the flip side the hardware isn't (yet) standardised, and probably never will entirely be, and we are in many ways at the very early stages of the IBM PC clone days, where each vendor strove to differentiate itself at the expensive of interoperability. Over time, these issues were resolved and it's not unlikely the same will happen with Android, so that vendor-specific capabilities can be handled cleanly and extensibly, without exposing software developers to a nightmare of testing on each platform. Google will probably need to get more aggressive about product certification, however, so that each device must pass some 'core Android' acceptance tests to be able to be logo-certified.
Whether issues like malware under Android will prove significant are hard to say. At present the devices are easily 'rooted' but out of the box, a standard phone is reasonably secure due to the design of Android's OS. However, with openness comes risk. I can't imagine that running anti-virus software on your phone is remotely a feasible solution - it's barely workable even on a standard PC - so this may yet be a significant issue for Android acceptance.
Taking things as they are right now, my experience with the Android platform vs the iPhone are:-
The iPhone is much more polished and apps are much more mature. However this is largely due to the two year advantage that the iPhone has had over Android, along with Apple's strict control of the platform.
The actual user experience under Android comes surprisingly close to the iPhone. The browser is quite capable and fast. Basic functionality like calling, contacts, mail etc. is quite acceptable. As an MP3 player it's fairly spartan - no EQ on my handset, for instance, and nothing like iTunes. On the other hand the SD card is directly mountable under Windows and you can just copy MP3s over to a directory; the player will find them and do a reasonable job of sorting them out. No coverflow, of course.
Battery life on the latest handsets is better than the iPhone. Scrolling is not quite as smooth - there's an annoying lag between touching the screen and moving your finger, before text scrolls, that you don't see with the iPhone. However this was on Android 1.5 and I haven't checked out 2.0 yet.
The apps are relatively immature compared to the iPhone. Still, this is only a matter of time and not a fundamental issue with Android
On lower end Android phones - even very recent ones - application storage space is relatively limited - it can be as little as 70M - and because Android won't allow apps to be executed directly from SD cards, this is proving to be a real gripe with the Android community. Sure, apps can place most of their resources on the SD card but this is still a real bone of contention and probably the single weakest point with Android currently. Handset vendors understandably want to keep costs down so adding internal flash memory is obviously an issue for them.
Despite the much-vaunted seamless integration with Gmail, I have yet to figure out how to sync contacts added to the phone back to Gmail. It works the other way, and you can import/export CSV files to Gmail from Outlook, but this is not quite the experience I anticipated from Android.
Getting started with Android is much simpler than with the iPhone. Apart from not having to learn Objective C - a strange amalgam of C and SmallTalk - the SDK is pretty slick. Although Eclipse is not my favourite IDE (it's just SO Martian!), it did not take very long to get everything up and running. To my utter amazement, an empty Android project compiled and ran and downloaded to the phone the first time, displaying 'hello Android' in a window, without me having bothered to learn anything about the actual nuts and bolts of actually writing the code. This is encouraging. I was also able to drag buttons etc. to the layout and then immediately run this - so the learning curve is nicely progressive without you having to absorb enormous amounts of stuff before you can even get 'hello Android' running. And the project structure looks reasonably clean and simple and installation is nice and straightforward. This is a well-thought-out platform, technically, and very developer-friendly. And you can develop on Linux or a PC. When it comes to iPhone development,yes, technically you MIGHT be able (especially for jailbroken iPhones) get the toolchain running outside of a Mac but the process is fairly arcane and you have little developer-friendliness once you're done.
So, can you make money?. Well, as Apple's App Store has shown, it's tough. However, the big deal under Android will be much more I think in the LOB area. If you can help a company to provide its mobile users with functionality over and above what they could do with a web-based 'always on' solution i.e a rich client with some local storage and sophisticated syncing, there are some real opportunities. Point of sale, healthcare, etc. But they will probably be more 'bespoke' than shrink-wrapped, although potentially there are some niches. As for gaming, Android is potentially a viable platform but I think most of the gaming market is potentially in the iPhone arena with people who want a 'it just works' experience.
Don't forget the carriers, too. In Europe, they've been brought to heel by the EU and much as they may grumble, they know that Google Voice and Skype are going to have to be allowed or at least tolerated. In the US and Canada, the carriers have gotten away with blue murder for so long now that it's not impossible to imagine Android doing much better outside the US, in the same way that GSM dominates CDMA everywhere else in the world. This is because US/Canadian carriers have much more control over the handsets available to consumers on their networks than in Europe, where unlocked 'simfree' handsets are much more common and there are also more carriers competing aggressively with each other.
In particular in Asia and South America, Android will be very attractive because the handset cost will be so low and the carriers likely to be much more accommodating.
This may also be something to consider as a developer, when defining a target market. We've already seen the writing on the wall here, with the disastrous rollout of the iPhone in China. It's easy to see why Chinese consumers sat on their wallets here, especially when you compare their home-grown technology like the Huawei handset I've already mentioned. It would be easy to imagine some kind of risibly clunky plastic brick, but we forget that the Chinese have been manufacturing high-tech for us for many years and this is a quality piece of hardware quite comparable in capability with the iPhone. Our cultural imperialism can trip us up, sometimes, and Apple have gotten a little too arrogant and overconfident recently. China has taught them a valuable lesson.
Finally, there's the issue of whether handset vendors will provide upgrades for previous models when new Android releases emerge. This was a big problem for Windows Mobile, where most handset vendors left customers stuck with the version their handset came with. Whether this will be the case for Android remains to be seen. If handset vendors don't provide support - and in many cases they will see this as an unnecessary cost - Android could fail, because these devices are virtually as powerful as PCs, and if you purchase a PC and then found you couldn't upgrade it, think how you'd feel. Currently Apple has demonstrated that all iPhones can be upgraded to the latest OS, albeit obviously that new hardware features can't be used. This is a really big plus for Apple.