And it helps allow them to not use a virtual memory swapfile. This makes performance much more constant and predictable. One of the things you don't see nearly as much of on iPhone OS is beachballs/hourglasses and random interface-freezing lag. This not only improves the experience, it makes it easier to use: lag that makes the UI unresponsive can be really confusing to users. "Why didn't my button click do anything this time?"
There was an old post on here with complains about memory constriction on the iPhone. One of the problems was not having a consistent amount of memory available to things like games. Sometimes there was enough memory to run the game, sometimes not. (Things like Safari are allowed to multi-task and eat up RAM outside of the currently running program)
[edit] I should add that another complaint was that the iPhone kills off processes that are using too much RAM (so if a game starts up and fills too much of the available RAM, it dies with no feedback to the user as to why this happened)
This is when an app is tied up doing something CPU-intensive. There's just plain no way around that one (though the app "should", when possible, be doing its work on another thread so that the UI stays responsive). If there were several more apps in the background all further tying up the CPU, it'd be way worse.
My 3G is unresponsive regardless of what app is running or whether an app is using the CPU. Even the springboard locks up at times. It's the OS itself (or the 3G hardware, more likely) that's the problem.
Not saying that multitasking wouldn't make things worse, but don't give any props to iPhone OS for avoiding delays. OS 3.0 is embarrassingly laggy on the 3G.
