One of the things I like most about the iPhones interface is its use of drag and drop. Ive never seen it on a cell phone before (it may well be out there on other models, I just havent encountered it) and its awesome. Id like to see a lot more of it on the iPhone in the future.
Right now, drag and drop comes into play in two areas of the iPhone: the iPod and the phone.
In the iPod section, you can customize your menu options at the bottom of the screen using drag and drop. This is very smart. Cell phones that Ive used in the past never offered a user-interface change as smooth and clear as this. They always left me guessing slightly as to whether I had made the right change. No such worries here. Just a clear, simple process for doing what I want to get done. Exactly as it should be.
In the phone application, drag and drop is used to reorder the Favorites list of frequently called numbers. Its just as simple here. Just hit the edit button, grab the name, and drag it to where you want it to go.
Drag and drop is an interface that most everyone understands from its years of use on desktops. Its easy to understand and use. I hope future versions of the iPhone make much wider use of it. That would make the iPhone every more fun to use.

