In the about 1.5 years since the G1 came out, Android has come a long way. 3 major releases of the platform have added important missing features like an on-screen soft-keyboard and helped harden the platform based on experience in the field. At the same time, developers have contributed a wide range of expected and unexpected applications, and learned how to write them so that they don't drain the battery within minutes.
There are now half a dozen or so Android phones on the market and many more in the pipeline. In particular HTC, previously a pure windows mobile shop, seems to be confident enough in the future of Android to release it on their most advanced hardware, a move which would certainly upset their strategic OEM partner Microsoft.
With the success of Android, there also comes the increasing risk of fragmentation into a plethora of mutually incompatible vendor and carrier specific versions. Due to the permissive nature of the Apache open-source license, this cannot really be avoided. By putting out the Nexus One as a leading example of"Android done right, according to Google", Google has now one more way to coerce the members of the open handset alliance to follow its lead and not produce restricted, proprietary and limited versions of Android. In the end it might matter less how many unlocked Nexus Ones Google actually sells, but the fact that they are available might have some effects in keeping carriers and vendors honest.
Compared to the G1, the Nexus One feels very snappy, thanks to the faster CPU and increased memory. While the G1 had physical buttons for standard android operations like "home", "back" or "menu", the Nexus One has dedicated touch buttons at the bottom of the screen. The green & red call control buttons are now missing, which means that all phone operations must be done from the touch-screen. While on the G1, pressing the call button always was a shortcut to launch the dialer, this has to be done explicitly on a Nexus One, either from the app panel or a home-screen shortcut icon. Instead the Nexus One has a dedicated "search" button, which shows the crucial importance of search in "Android according to Google" (more so than making a call, apparently...). Without the physical buttons command buttons, there is now the need for a dedicated on/off and sleep/wakeup button, which is awkwardly placed at the top edge of the phone. Since I always unlock/lock the phone before/after any usage, the location of this button is unergonomic for how I typically hold the phone and is a bit of a hassle. The Nexus One still has the trackball, which I hardly use and which takes up significant real estate on the phone and introduces potential fracture points in the casing (the faceplate of my G1 had cracked along the trackball opening in less than a year). I would happily trade it for sleep/wakeup button on the faceplate or simple reduce the size of the phone by as much.
The physical design of the Nexus One is low key and unspectacular: a flat, sleek shape with rounded edges. But it feels nice and solid in the palm of my hand - how a palmtop computer should feel like. Fortunately gone is the ugly and awkward "Android chin" of earlier HTC devices. So far the only flaw in the case is the somewhat sharp edge of the protruding camera lens.
The charger/USB port has changed from mini-USB on the G1 to the new standard micro-USB on the Nexus One, which unfortunately means that existing G1 chargers and USB cables cannot be reused.
On the software side, Android 2.1 offers gmail support for multiple accounts and a contact applications which can sync to multiple sources (multiple google accounts, facebook, exchange). The home screen application, app tray, dialer and contacts applications have received a significant redesign and face lift, but otherwise the changes are rather minor compared to Android 1.6 released not too long ago.
Overall, I am very happy with the Nexus one as an everyday phone. It is a very capable high-end consumer smartphone and probably the first Android based phone that is clearly in the same league as the IPhone.