For more than a year, Apple’s iPhone has garnered the lion’s share of press and remained a must-have device for gadget junkies. In an industry in which $300 products quickly become free incentives for signing a contract, the iPhone has managed to remain relevant. This is due in part to Apple’s marketing savvy, which made many people—consumers and journalists alike—look past the device’s shortcomings, but also because the iPhone’s innovative interface and full web browser provided consumers with something truly new.

Now, handset-maker HTC, T-Mobile, and Google hope to get some of the attention the iPhone has received by releasing the G1, the first mobile phone to use Google’s mobile OS, Android.

Physically, the G1 at 4.6”x2.16”x.63” is slightly larger than the iPhone. However, it also includes a full slide-out QWERTY keyboard. Additionally, it has a trackball for navigation and dedicated web-browsing buttons. A 3.1MP camera, 1GB of storage, and 480x320 screen round out the offerings. The phone is currently available for preorder; online and retail sales begin on October 22. The G1 will retail for $179 with a two-year contract.

The G1 includes many of the features that debuted on the iPhone, including a full web browser, but several new ones as well. The most interesting of these is the integration of a compass with Google Maps’ Street View feature. With the compass activated, the Street View image on the phone will align with the direction you point the phone and adjust as you move. The phone’s music player links not to the iTunes stores but rather Amazon MP3, Amazon’s digital music store, which sells only DRM-free MP3s; single songs cost 89 cents. The device does, however, have a number of shortcomings, the most noticeable of which is a lack of Microsoft Exchange and desktop sync support. Lack of a headphone jack also seems to be an oversight.

To further boost interest in Android, shortly after the SDK was released the company announced the Android Developer Challenge, which awarded prizes of $25,000, $100,000, and $250,000 to the makers of the best Android mobile apps. While Apple operates as a gatekeeper, determining which apps can be sold at its App Store, Google is allowing anyone who registers with the company to upload program to Android Marketplace. While this will ensure that numerous apps of dubious quality will make it to the marketplace, Google hopes that the included user rating system will help worthy apps flourish. For the time being, all apps on Android Marketplace are free.

The G1 will be exclusive to T-Mobile. The smallest of the major U.S. carries, T-Mobile has lagged in its development of a 3G network; however, the company recently announced the launch of such a network in 27 U.S. cities.  Two G1 data plans were announced at launch, a $25 unlimited data plans and a $35 unlimited data and text plan. However, at the launch press conference, officials said consumers would be unable to use the G1 as a modem.

The G1 will be exclusive to T-Mobile. The smallest of the major U.S. carries, T-Mobile has lagged in its development of a 3G network; however, the company recently announced the launch of such a network in 27 U.S. cities.  Two G1 data plans were announced at launch, a $25 unlimited data plans and a $35 unlimited data and text plan. However, at the launch press conference, officials said consumers would be unable to use the G1 as a modem.

Unlike the iPhone, Android handsets will not be limited to a single carrier. Google, of course, wants to make to ensure thatAndroid phones are available on as many wireless providers as possible because the company will generate revenue through ad revenue as people use the phones to go online. Because  Android handsets will be made by numerous companies and eventually be available on a number of different networks, Android-based phones will not provide a singular experience—and some wireless providers may even choose to strip some functionality to from phones.

How this launch will affect the relationship between Apple and Google is unclear. The iPhone integrates a number of Google products, including YouTube and Google Maps, and Eric Schmidt, Google’s CEO, sits on Apple’s board of directors. Until now, the companies have not competed head to head.