As Glenn Fleishman described in "AirPort Update Adds Archive for Time Capsule, External Mounted Drives for AirPort Extreme" (2008-03-19), Apple's recent AirPort Extreme Base Station version 7.3.1 firmware update restored the capability to use a USB hard drive attached to your base station as the destination for Time Machine backups, putting an end to months of complaints by users. Now reports are circulating that the same feature has been added to the iPhone and iPod touch.
Members of Apple's $99-per-year iPhone Developer Program with access to the beta release of the iPhone 2.0 firmware have confirmed that iPhone and iPod touch models with the new firmware appear as destinations in Time Machine, as long as both the handheld and the computer running Leopard are connected to the same Wi-Fi network. As with the AirPort Extreme firmware update, Apple's documentation for the iPhone firmware update fails to mention this change.
One of the developers to discover the new feature, who wished to remain anonymous, expressed puzzlement about the capability, asking, "Why would you use a device with only 8 to 32 GB of memory as a backup device, when your computer's hard disk contains much more data?" Some developers we contacted believe the so-called feature is actually a bug, which will be removed before the firmware's final release. Others, however, believe the change presages the imminent release of iPhone and iPod touch models with dramatically larger amounts of storage. For example, an iDevice with even 80 GB of space (half the current maximum of an iPod classic) could back up the entire contents of a MacBook Air's 64 GB solid-state drive with 16 GB to spare for music and videos. Such a device would address the issue I've frequently mentioned that Time Machine provides no convenient mechanism for storing a copy of one's backups off-site, though Time Machine's current lack of an encryption option would still need to be addressed.
Meanwhile, the iPhone and iPod touch still - even with the beta version of the 2.0 firmware - do not offer a way to access their storage space as an external volume on your Mac, whereas most other iPod models do. Users can work around this limitation using third-party hacks such as the $9.95 MegaPhone utility from Ecamm Network, though such utilities do not provide a user interface for interacting with any extra files directly from your iDevice.