(The obvious answer is "Flash sucks, that's why".) Brent Simmons:

We all know that the iPhone doesn’t include Flash. Various theories have been aired.

I have a theory that I haven’t heard yet: Flash wasn’t included because it crashes so much. I detest Flash. It's a resource hog, and there are very few Flash-based sites that are well designed to begin with. I hope Google moves YouTube to H.264 video for the "regular" Internet, not just for the iPhone's access. Roughly Drafted makes the case that the iPhone is a threat to Flash, as well as to Windows Media and Real. Why? Because H.264 is an standard video codec that doesn't rely on a software processor, for one. In laymen's terms, by using H.264, your system doesn't have to work as hard, because it likely has a hardware processor capable of decoding H.264 without having to hit your general processing unit, which means you get more battery life, use less power, etc. If you're a content provider, you don't have to worry about providing multiple video formats. You can simply output a single, MPEG-based H.264 video that you know users won't have to have a plug-in for, like Flash, Windows Media, or Real. The other upside is that you don't have to pay any licensing fees for those three formats, either. Sounds like a win-win to me. [Wave of the phin to Lee for the Roughly Drafted link, via IM.]