What that means is that Apple's allowed to get away with certain things. They can create programs reliant on certain hardware features in the iPhone because they know it'll be there on every phone. They can rely on a high-quality multitouch screen, a certain virtual keyboard set-up that works very well, and a particular screen size that never changes.
What that means is developers don't have to hedge bets. They can go all-out with their designs, knowing that what they see designing is going to be what every iPhone user gets. They can create a design perfectly suited to the iPhone's dimensions and processes, ignoring any possibility that that screen size will be any different or that the phone's functionality will be lacking certain features or a certain high quality. So you have a lot of apps that blow Android applications away, because the developers are so free to be wild.
The one that I think about the most is Weightbot, which has a custom UI that mimics a hard steel door, has a single narrow band that scrolls through days/weight, and which, when rotated, "opens" the door at its seams to reveal what's behind it. That's a design that requires the iPhone, because you'd have to be insane to make a narrow band that requires ultrafluid touch controls on an OS where you don't know how good the touch controls on every phone will be. You couldn't possibly design the app to fit the screen so well, to use the law of thirds like it does to position every control pixel-perfect, to have a major feature rely on tilt-control, or even to have that sliding-out graphic, which takes a knowledge of how it will look on the screen.
You could make an application similar to Weightbot on Android. It wouldn't work as well, it wouldn't look as good, and it would have to compromise its elegance to make sure it worked correctly across all phones. You'd spend a lot more time hunting for bugs. You wouldn't have access to the gorgeous interface design that Apple gives developers out-of-the-box to make apps look iPhone-y. You miss out on a lot of elegance, in other words, because unlike iPhone, Android is not designed to be an elegant product.
(BTW. I do think the iPhone is more polished that any current release of Android. I'm not sure it matters though. Windows XP is laughably less polished than OSX, but it doesn't seem to be hurting in market share.)