The Kindle is based on an whole new technology called E-ink. It uses power to write the page to the screen, then it does not need power to keep the page drawn. (kind of like a really advanced etch-r-scetch). This is what makes it nearly identical and easy on the eyes as reading a regular page from a book. Its unlike any LCD or phone screen out there.
If cell phones were going to truly stand a chance against the kindle the manufacturers would have to build a phone using the E-ink technology. No app can simply do this.
Another note about E-ink is that it is not a good option for video. The screen does not flash on and off the way an iphone screen (or any lcd screen) does in order to watch videos in high quality resolution. E-ink does not even render a color display.
So even if the manufacturers made a kindle phone, this phone would not be color and not be able to display video. For these reasons I do not believe that the kindle has to worry about the phone industry at all.. Think about it... would you really read a whole book from your phone or even your computer screen for that matter?
I agree with radiationman that one of the biggest problem with sales would be that not everyone understands how revolutionary the e-ink technology is. If people could see the kindle for themselves I think sales would skyrocket.
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