Everyone else commenting seems to be pointing out the technical hurdles / problems with a flash installation, but they are ignoring the huge business problem with NOT implementing it: customers want it.

Eventually, phones are going to come along that allow free apps, your own music, flash, similar browsing experience, and a real keyboard... and smart people will start to switch back.

In other words, the technical hurdles here are less important than the business ones. This is Jobs trying to have his iron grip, but in the long run, I dont see it working out.

I think the massive innovation on the Internet is due to the fact that it's easy to see the code for everything (HTML, CSS, Javascript).

Flash (and Silverlight, etc.) are all attempts to hijack the Internet as we know it. They do offer a better experience, but at a cost (freedom, more code, less innovation, licensing fees, patents, higher costs).