Nokia's first touch-enabled phone, the 5800 Xpress Music "Tube", will not be competing with the iPhone or iPhone 3G. This is because the Tube will feature a stylus, meaning that it won't have a multitouch interface like that on the iPhone.
However, the Tube is still a much anticipated entry into the crowded mobile market, as it will be the first to feature the S60 5th edition operating system. This new OS is set to feature many new user interface improvements over older Symbian software, including the addition of a touch-controlled interface.
In my opinion, the Tube is actually set to compete with the likes of the Samsung Omnia. The Omnia, like other similar smartphones, features touch, but not multitouch, so there's no fancy pinching of the screen to zoom in or out of a photo, for instance.
Although not taking on the iPhone, I feel that the Tube is a very important move on Nokia's part, as the company desperately needs to enter a field that is rapidly growing - touch screen-enabled phones.
I see the Tube as a "flagship" of Nokia's brand, a phone that combines style with soem great features, and knowing Nokia, we can expect the Tube to have a LOT more features than the iPhone.