An AT&T executive hints at new Google widgets to be available on the iPhone after the launch.

These new Google apps are supposed so hot that quote: "...some of the Google applications that are coming will serve to distance pricing concerns from the minds of consumers".
Google Search and Google maps are already announced. Not sure what could be another hot application that comes from Google for the iPhone. In my opinion the way the phone works and the touch screen interaction are already good enough to rectify some of the high price. Add the coolness factor of being one of the first to have it, the $500 are fine.
More details on Apple Insider.