"The iPhone developed the way a lot of cool things do: with a false
start. A few years ago Jobs noticed how many development dollars were
being spent—particularly in the greater Seattle metropolitan area—on
what are called tablet PCs: flat, portable computers that work with a
touchscreen instead of a mouse and keyboard. Jobs, being Jobs, figured
he could do better, so he had Apple engineers noodle around with a
tablet PC. When they showed him the touchscreen they came up with, he
got excited. So excited he forgot all about tablet computers."

Jake

http://www.time.com/time/nation/article/0,8599,1575410-1,00.html