Apple's smart decision: 3.5 Inches
Dustin Curtis has been wondering why Apple chose to make the iPhone screen 3.5 inches - and not larger like many competitors:

Touching the upper right corner of the screen on the Galaxy S II using one hand, with its 4.27-inch screen, while you’re walking down the street looking at Google Maps, is extremely difficult and frustrating. I pulled out my iPhone 4 to do a quick test, and it turns out that when you hold the iPhone in your left hand and articulate your thumb, you can reach almost exactly to the other side of the screen.