These prototypes are called "P series devices," and Dickson reports that they're the first step of every Apple project. When it came to the iPhone, two different designers went head to head: Tony Fadell, who created P1 (left), and Scott Forstall, who designed P2 (right).
After looking at the two devices, it probably won't surprise you that Fadell is known as the "Godfather" of the iPod (RIP). P1 mimics the scrollable design of the iPods we used to use solely for storing and listening to music, with the same menu system and fonts.
P2, however, invented something totally new. It was the first true touch screen driven solely by apps. While the look is miles behind the finished product of the first iPhone, this is the system Apple ultimately went with.
But just think! Had Apple decided to stick to their roots, making the iPhone a closer relative of the iPod, we could be scrolling our way through texts and looking through files and folders and drop-down menus rather than tapping our apps. When you think about it, Forstall's design totally flipped everything we knew about conceptualizing technology on its head, and I think it's safe to say we're better for it.