So, you're comparing a third-generation iPhone with a first generation Android phone?
3G indicates support of third-generation wireless technology (in this case UMTS), which was not in the first iPhone. The iPhone 3G is actually the second iPhone model.
All iPhones have most of the same software features, including the original iPhone (non-3G). So far Apple has released OS updates for all models.
Adding features does not necessarily increase functionality -- it just makes the manuals thicker.