The Palm Pre  is going to be a hot item when it launches this summer--possibly hot enough to tackle the iPhone . One reason it's gaining so much traction is that the Pre's features weren't designed to compete against the current iPhone, but the next generation. And today Apple took the battle to Palm, with an updated software package that's designed to fight right back.
Search. The first feature people wondered about was the Pre's "Universal search" function. This is a single search bar that allows keyword hunts in "web and user’s applications, contacts, and dialing information," as well as web pages. Current iPhone software has no search functionality other than a search bar within Safari. But iPhone 3.0 brings Spotlight--almost directly from OS X it seems--to the iPhone, with searching within Calendar items, iPod tracks, Notes, contacts, web pages, email headers (but not message bodies) and applications. This last is pretty powerful, since the Spotlight UI is accessed quickly by a gesture from the home page, letting you navigate to an App easily if you had, say, 100 apps installed.
Multiple activities. What some call multitasking, Palm calls "multiple activities," Apple calls it background-running apps. In the press event to announce the Pre, Palm splashed this feature as a direct snub at Apple--the current iPhone firmware forbids it. Even Apple's "push notification" feature, a half-way house for background apps, was mentioned months ago, then disappeared totally. But iPhone 3.0 will bring push notifications, and Apple was careful to explain why there's no background app-running: battery life. Apple's said it had tested running background apps on BlackBerrys, Windows Mobile devices and so on, and in every case "stand-by time dropped by 80% or more." That's a deliberate snub right back at Palm, especially since Apple qualified it by saying an IM app running push only reduced the iPhone's stand-by time by 23%.
Navigation. Palm's Pre has full GPS navigation functions, with turn-by-turn directions--but it's an extra, coming from Sprint Navigation and powered by Telenav . The current iPhone specifically excludes turn-by-turn navigation, effectively shutting off full GPS functions. Firmware 3.0, however, does allow it, with a single condition: "bring your own maps." That's pretty much an open door for third party developers (even big names  worried about losing market to smartphones) to get in on the iPhone nav goodness.
Calendar syncing. The Pre uses Palm's Synergy to link up Outlook, Google and even Facebook calendars to one location, whereas iPhone 2.0's Calendar app is more than a little limited--you can't even invite meeting requests from the phone. The new firmware adds support for Exchange, CalDAV and .ics formats for subscribing to different calendars, and it'll let you create meeting invitations. CalDAV is supported by Google Calendar, Yahoo Calendar beta and others, making it a now potentially fully-synchronized Calendar app.
Camera. The Pre has a 3-megapixel digital camera with an LED flash light, but strangely the jury's still out  on whether it'll support video recording at launch--some think that will be added later. The iPhone's 2-megapixels seem puny, and it can't record video. We're pretty certain  that Apple omitting info on this today means the next-gen iPhone will have hardware and software to rival or surpass the Pre--plus it's a relatively easy hardware upgrade in a new device.
Stereo Bluetooth. The Pre has A2DP, the current iPhone doesn't. Apple said today iPhone 3.0 will support stereo bluetooth, and that the feature can even be "unlocked" on current-gen iPod touches.
Copy and Paste. The Pre has it and iPhone 2.0 doesn't, but iPhone 3.0 has a fab copy-paste function that lets you copy text almost from anywhere to anywhere, and comes with a neat "shake to undo" trick. Apple's been holding off on this basic option until it's absolutely nailed it.
What's most interesting is that Palm had to pull together a whole new piece of hardware to tackle the iPhone, but most of Apple's response has been achieved in a firmware upgrade. Of course a new iPhone is due around July, which dovetails with iPhone 3.0's "Summer" launch schedule. It seems the battle is on.