The way you deal with everything in this UI is just...well, it's better than either of my WM phones, and not just "kinda" better. It's better like a BMW is better than an Edsel. I think there's a few reasons for this.
First, Apple is just better at intuitive UI for non-techies than Microsoft. There's no nice way to say this. Secondly, unlike Microsoft, which has a Windows-like UI on a completely different OS for their WM phones (two actually, the "Smartphone" version and the "PocketPC" version), and some rather significant differences between them, the iPhone is running, as Steve said, OS X with the iPhone UI.
Which indicates something important. The version of Mac OS X running on the iPhone is based on Mac OS X 10.5, a.k.a. Leopard. Why do I say this? Well, Steve specifically mentions Core Animation in the Keynote, it's on the slide, and if you look at the sneak peak for Leopard on Apple's site, you see that Core Animation is a new feature in Leopard. While it's not definitely based on Leopard, the probability that the iPhone is using Leopard as its base is rather high at this point.
So thanks to avoiding "hard" buttons as much as possible, you get a more flexible UI, and by basing it on Mac OS X, you get things like Core Animation, etc. The iPhone has a small number of "hard" buttons, and that will end up being a good thing. My VX-6700 has something like 14 "hard" buttons, not including the keyboard, most of which I rarely use, because they're inconvenient, and I'd have to start turning the silly thing over in my hands like a gorilla with a new shiny rock to even see them.