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This post will be an over-simplification in order to not create an essay but; Android is linux. The only differences are cosmetic (and I'm not trying to be flippant, cosmetic changes mean a lot to the user experience). What defines an OS to users of today tends to be how they interact with it and what applications are available for it. On both counts android exceeds the basic linux experience, especially since there's very few graphical environments designed to accomodate mobile touch interfaces (but there are some).
If you want your users to be able to install the apps they hear about from their friends then go with android. If you want to supply most apps yourself then go with a stock linux distro. But be vary, nokia's n900 was a terrific phone (which I still use as a corporate, mobile sip client) but it was pretty much dead in the water due to the lack of developer support. Well, commercial developer support at least.
The major difference for you as developers is that android pretty much forces you into using java or some kind of abstraction layer (monodroid is an example). With regular linux you can write your applications in any language your developers prefer.
Android also has a buzz value which linux lacks.
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