Before the iPhone, the smartphone was still a very niche device though. The closest thing to mainstream is the BlackBerry, but it was mostly used for texting and email. There was already a marketplace, but the user experience was horrible. The web was barely usable. Thing is, everything has been in that state for quite a while. The smartphone market had a chance to evolve, but it wasn't really going anywhere.
So we went from having a very low end computer in our pocket in a market that appealed to the people who really needed a smartphone to having a powerful toy of questionable real value to the original smartphone audience.
I'm not saying the iPhone didn't change the market. I am saying I don't believe it changed it for the better, where "better" means improved for the original smartphone owners. Look at the casualties from the iPhone: Blackberry, Windows Mobile, Palm, Nokia. 4 devices made for business, durable and professional.
Has there been any more substantial advancement in the smartphone market in the 6 years the iPhone has been on the market than in the 7 years between Windows Mobile and the release of the iPhone? Sure the iPhone changed the market... half a decade ago. And ever since, all its influence has brought us is more of the same.