Apple has rarely done that in the past.
Well look at the iPod.
First the iPod (expensive) then the ipod shuffle (Cheap.)
While the shuffle is more than just cheaper, a similar concept goes to it.
If they make an cheaper iPhone with smaller screen, reduced funcitonality and cost, how is that much different from introducing the iPhone shuffle for $99?
The iPod line has various cost models, and I assume Apple is going to milk every penny they can out of the iPhone line.
There is a consumer demographic that will NEVER pay $600 for any phone. Why not create a product to tap the under $600 market as well? Put Motorla's wireless division out of business for good? Get people hooked on iPhone so they want to upgrade at Christmas.
If anything the Playstation 3 at only $100 more than the XBOX 360 is evidence of a psychological price barrier. Then the Wii is flying off of shelves because it's half the price. Reduced feature set, but hey, there are a lot of people that won't pay $500 for a game console.
Of course other factors contribute to the console wars so it's not really the best analogy, but a lot of it does have to do with prices.
I used to work at TiVo, we launched the Series 3 at $700 or so. We knew there was a very small market for that and had to get the $300 or lower HD box with reduced feature set (and cost reduction) out ASAP to hit mass market. The series 3 would have been cheaper except it was so dang expensive to build we couldn't.