The touchscreen interface to the iTouch and the iPhone was a crucial innovative step. So far as I know, Apple got this right from the beginning. No false steps. Just a really good system that is steadily getting better (OK -- I grant you that the touch screen keyboard is not yet the best part of the iPhone system).
There are two key ways in which the touch interface helps the iPhone to become the best digital reading device, in spite of its very small size.
First, the touch screen allows the user to shrink or enlarge the page with simple 'pinch' or 'spread' moves of paired fingers. Because we use our fingers to stretch or compress the page, and the image responds immediately, it is very easy to achieve a high level of control of image resolution. It would be much harder to do this work with the conventional touchpad or mouse of a desktop PC. The facility with which the page can be resized (web page, or digital facsimile, eg JPEG in the case of Exact Editions) means that on the iPhone platform, at least, there is much less pressure for the 'reflowable' text beloved of eBook enthusiasts. There is really no need to reflow text to achieve a different point size, when the whole page can be resized with finger pinching. In fact, the digital edition on the iPhone wins this contest hands down because, of course, images and complex layouts are also easily and straightforwardly resized on the iPhone. This is notoriously difficult to achieve on specialised ebook devices -- they tend to be defeated by highly illustrated format, or books with lots of tables and code. The touchable screen with its rescaleable pages solves these problems at a stroke (or at worst with a pinch). Just use the image in the book or magazine as the designer laid it out.
But the second, equally important, advantage of the touch screen interface to the text on an iPhone is that it has forged a very direct relationship between the text as presented on screen and the functionality available to users with the text. We only need to touch the text to act through it. To use it to launch our actions. The links, the urls, the email addresses (and with Exact Editions the telephone numbers) within the text become tangible, immediately indexical resources.
The text contains the link (it was there explicitly in the book), markup ensures that the system (the iPhone) knows that a link is a link, or a postcode is a postcode, and the user knows (or after a little trial and error discovers) that by tapping a link she will jump to a web page, a post code will jump to a Google map, and a live phone number will initiate a phone call, from the iPhone.
Necessity is the mother of invention, in the case of the iPhone, as elsewhere. There is not enough room on the device to support a mouse-device or a touchpad, other than the screen. So the screen had to be touchable. But there is no doubt that the Apple engineers have crafted an extraordinarily effective solution. As more books are piled into the iPhone's eco-system, I think we will see that there is a growing realisation that the digital text of a book or a magazine should be seen as the starting point for network based interaction with it. The text itself is the starting point, within it are located the points, the referrers, codes and symbols which engender user interaction. The digital version of a text, having many explicit or implicit resources for linkage and reference becomes a hypertext in its own right and one which engages the reader in more than mere reading. Much of this interaction will be initiated by finger gestures. For sure, reading is part of the point of a digital edition, but equally, it has to be said that, pointing is fully a part of the reading of a book on the iPhone.
There is another key feature in the iPhone device which makes it such a good reading medium. Orientation. But we will discuss that on another occasion....