there are thousands of apps being released on the iPhone, which don't use Java, and don't need it. I don't see a problem here unless you are a java developer that can't program in anything else, and want to code something for the iPhone.
also, Java sucks IMHO, the iPhones SDK is much more powerfull anyway, and is intended to be used for the iPhone.
There are plenty of EXCELLENT iPhone Apps available, that work seamlessly with it - why would you wanna run some crappy java games/apps on it ?
also - java on websites are executed on the backend, so that wouldn't cause a problem when surfing on a page that uses java.