Mobile Safari Does Not Support Flash (and Never Will)
Listening to some people, the lack of Flash on the iPhone/iPad is some sort of crime against nature . There are numerous complaints about it online - all bemoaning the inability to play their favourite Flash games or view video. These complaints miss the point entirely - there are two simple reasons why Flash will never be supported in Mobile Safari.
The first reason is simple - Steve Jobs is a jealous God and thou shall have no other Gods besides Him. Apple created the App store so they would control the single way of getting software onto the device, being able to load a flash file from a browser completely circumvents this control. Simple.
Now we have that out of the way, we can move onto the second, more interesting, reason.
Flash would suck on the iPhone.
Lets talk about Flash video first. Most video sites use a custom Flash wrapper to display video in a sub-frame of the browser, with controls to zoom the video to full screen. The sub-frame is usually of a fixed size (640*360, etc) and surrounded by additional HTML (ads, links to other videos, etc). Straight away you should see the problem - the video is already bigger than the iPhones screen. Mobile Safari does an excellent job of resizing web pages, but that is going to leave you with a postage stamp sized video with even smaller controls. Going fullscreen may be a solution, if you can mange to tap the tiny button, but then you are not really using Flash as part of a web page anymore.
Back in the day (about 5 years ago), Flash video was a step above anything else on the web due to its widely deployed and not-too-bad codec. These days Flash is just a none-too-convenient way of displaying standard h264 files which the iPhone can play natively. Most of the big video sites have realized this and just serve the raw file to iPhones instead of trying to wrap it in a custom player, to the benefit of everyone.
(Drifting slightly off-topic for a moment, I imagine the use of Flash as a video player will start to decline even of desktops now that HTML5 is here with its useful <video> tag.)
Now lets talk about Flash games - Tower Defense, Crayon Physics, room escape puzzles, etc. I love them, you love them, everyone loves them. There is just one problem - none of the thousands of existing games would work on the iPhone even if Mobile Safari supported Flash perfectly!
The iPhone doesn't have a keyboard, so most arcade-type games are right out. Even games that exclusively use the mouse would have problems since tapping your finger on the screen is much, much less precise than using a pointer. In addition, on the iPhone you effectively have multiple pointing devices - how would current Flash apps handle that?
For a quick demo of why sites like newsgrounds will never work on the iPhone, resize your browser window to 480320 (or 320480 since that is more usual) and visit your favourite gaming site. Now set your mouse pointer to a big white blob instead of an arrow to simulate tapping with a large figertip. Remember to stop playing after 45 minutes to replicate the battery drain. See how much fun you have.