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I suspect that the GSM and other phone carriers stacks are relying highly on security by obscurity and it's part of the deal that Apple just doesn't allow third parties to take a snoop.
Personally I think using Ajax is a good thing where portability is nice (e.g.: accessing your e-mail everywhere through GMail is nice) but if it doesn't a standard desktop app is just the better way to go. :)
Java and other languages for that matter would indeed be effective in sandboxing, but it comes at a cost. It does take quite some space on the device to implement script and, I think even more important, it takes quite some effort to maintain an implementation.
Maybe the iPhone applications will be local websites, as the widgets on mac os x are written with html/css/js too or as in the same way as the who UI of firefox is too (actually, that's not completely true). They must have a browser with js support anyway (otherwise they wouldn't be able to support google maps) so it's all win for them.
As it was demonstrated the iPhone applications, at least for now, will not be local websites, they are just pulled from the server every time. The browser in the iPhone is Safari, so that's indeed a full-blown browser with Javascript support. And Google maps does not run within the browser on the iPhone, they built their own client to Google's map data.
On GigaOm I read that it may actually be AT&T; who forced Apple not to open up the iPhone. AT&T; and every other mobile provider in the world probably is scared to death of VoIP. My Nokia N95 can make Skype calls, which are a lot cheaper than making calls on the normal cellular network. I think that's why they don't open up the iPhone, to prevent people from making VoIP applications.
Lets see what happens after the initial 4 year (?) contract with AT&T.
1. Bookmarkable applications. I can send you the URL of a particular screen, or a particular record.
2. This opens up applications to easily implement Most Recently Used Feature, or Most Recently Accessed Data
3. It makes it easy to add annotation-like features to an app (through mashups).
4. You can create mashups easily, e.g. treat an application as a component for free
5. Back button (MSMoney-style UI), although the caching of application screens on browser make this somewhat broken, but desktop apps will be able to address this.