3G is a high speed wireless technology. Think of it as broadband for your phone. 3G will allow you to have video conferences, content streaming, music downloads, etc... It will greatly expand the capabilities of the iPhone than to just a music player.
There is some pretty good info about 3G out there in the Wiki and Google search areas. There is a new technology already being implemented: HSDPA which promises even higher speeds and more services. So contrary to some myopic views, the iPhone has much more potential than just a music player.