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Imaging
This was a grey area in the iPhones armour during the time of the 2G and the 3G iterations of the device. In the company of the 3.2 and 5 megapixels of the world, the iPhones 2 megapixel camera was simply outdated. It did not have autofocus or flash and some even termed it a bad job at making a pinhole camera. To add insult to injury, it was incapable of capturing videos unless you jailbreak the phone and defy Apple's command. With the arrival of the 3GS in 2009, Apple played catch-up with the world and managed to cram in a 3.2 megapixel camera. This took far better pictures and supported video recording as well, that too at a very decent VGA resolution.
The first generation Nexus One already boasts of a 5 megapixel camera, with LED flash and autofocus and at least on paper should take far better pictures than the iPhone. The video recording too is better (not by much though). The Nexus One is capable of recording videos in D1 (720x480) resolution at 20FPS. While we are yet to see how the videos turn out, this is still better than what the 3GS can do now. 
Operating System
To start with, this is not an iPhone OS Vs Android battle but why the Nexus One is simply a more open platform as compared to the OSX platform of the iPhone. Apple's policy of not allowing developers to make apps that mimic the core functionality of their own existing apps viz. the calendar, browser and even an e-mail client is not applicable to Android. This throws in a lot of options for the consumer. I don't need 200 different apps to fart online! Give me a better e-mail client or at least the choice to switch between the applications of my choice.
Similar is the case with browsers. Who wouldn't love to see Opera Mobile run on an iPhone? Yes, the existing browser on the iPhone is quite capable, but then, all we are asking for is a choice! Apart from this, from what we hear from primary reports, the Nexus One seems to work a lot faster than the iPhone - even with the phone multitasking. While this might be attributed to the higher Clock speed of the Snapdragon processor inside the Nexus One, we should not forget hat the iPhone 3GS too is powered by a very competent ARM Cortex A8 processor, which by no means is a laggard.
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