Me and my DSi
I upgraded from a DS Lite to a DSi XL about a year and a half ago - right after they went on sale in the US. I did it mostly because I'm a large adult, and I really wanted the larger stylus & screen the XL model would provide. The DSi elements (camera, more storage, downloadable games) didn't really figure into my decision at all.
But a few months ago, a full year after buying it, I decided to check out the downloadable games - rather awkwardly named "DSi-Ware." I perused the market, and discovered that the prices ran between $2 and $12, with most games coming in at either $5 or $8. You couldn't pay for these games directly - you had to buy "point cards" in $10 increments - which made for a bit of a fun game on its own, as I figured out the optimal number of games to buy for my best value.
The DSi Shop breaks games down into dozens of interesting keyword-powered categories such as "Spaceships", as well as more traditional archetype-groupings like "puzzle," "racing," "strategy" and the like. Games come with videos and screen-captures, much like Steam's online store. Nintendo is now also displaying full games in the Shop for the 3DS - you can't download them, but you can use their browsing mechanic to investigate the current 3DS catalogue. There are no demos that I saw, though there are some free games available.
Moving around the Shop takes a bit of effort - each step pauses during a brief data load - but the recommendations are solid, so it didn't take long for me to find something I thought I would like. I made my purchases, and have spent the past couple weeks enjoying them. I especially liked Starship Defense, which was a $5 title and probably took up 30 hours of playtime. My overall experience with Nintendo's DSi Shop was overwhelmingly positive - I wouldn't hesitate to spend another $10 there if something caught my eye.
Me and my iPod Touch
I knew quite a few early adopters of the iPhone, and the "open SDK" for iPhone development was a hot topic around the studio. I didn't feel up to buying an iPhone, but I jumped at the chance to acquire an iPod Touch - essentially an iPhone without the Phone, but capable of running all the Apps. One of my first Apps was Skype, which let me turn my iPad Touch into a device capable of sending and receiving calls - so I felt pretty good about my purchase.
I had learned years prior that an iPod isn't really a stand-alone device. iPods require management through iTunes - so really they were just external playback machines for the mp3 collection / playlists I already had. My first apps were handled the same way - I'd research them and download through iTunes, and then copy them over to my iPod Touch. The only paid apps I purchased were Field Runners and Karma Star.
It took almost a year before I was regularly downloading Apps directly to my iPod Touch, and six months after that before I was downloading paid Apps directly. I still download very few paid Apps, because everything I was interested in came with a "Lite" version. In most cases, the Lite version sated my interest, so I would never get around to paying for a full version.
The App Store is fairly frictionless - I can hop in there very easily, and browse around for new games. If I want to pay for something, it's a snap. But I rarely feel like I'm discovering anything new - or putting in any effort. Apps are like commercials on TV (remember commercials on TV?) some of them are pretty cool, but I frequently note that they are a waste of my time.
It's really interesting to see how the character of these two markets for portable games is influenced by their commercial ideology. The DSi (and 3DS) are game machines - you buy them because you want to play games. An iPhone, for most people, is primarily a phone - albeit a super awesome phone with a camera + web access. I expect any game I play on my DSi to be awesome, whereas any game I play on the iPhone is basically just a bonus. I'm not invested in iPhone gaming, so I'm willing to idly churn through lots of chaff. The DSi Shop, on the other hand, is like a high-end game boutique with personal attendants.
What about market penetration? The DS is incredibly successful - somewhere around 150 Million units have been sold since launch. The iPhone has likewise seen tremendous success, with about 110 Million units sold worldwide. (That's a somewhat faster rate of sales, since the DS is an older system.) But only a small fraction of DS owners have ever used the online store - whereas the percentage of iPhone users accessing the App Store has got to be close to 100%.
The biggest difference, of course, is the fact that creating an App for the iPhone requires no special equipment - it's a relatively open platform. Creating software for the DS, on the other hand, requires a contract with Nintendo, and special development hardware. Nintendo also reviews all software for technical and quality concerns. With the iPhone, almost any software is available for download immediately.
So there are two factors driving the prices up on the DS, and driving them down on the iPhone. Nintendo spends a great deal of money licensing and verifying content for the DS, which means more up-front development costs. That means prices need to be higher, to help developers make their money back. The other factor is competition - the competition on the DS is relatively low, because all of the chaff is filtered out by Nintendo. (Well, MOST of the chaff...) The iPhone, on the other hand, is awash with chaff, alternatives, clones, and other distractions. More competition drives prices down, and the nearly $0 price-point for submitting your own App helps keep the channel full of competing products.