(image source — Mobile Art Labs mobileart.jp)
 Phone Book is a storytelling book package, created by Mobile Art Labs, which includes an iPhone app and a paper book with a slot that you can slide an iPhone into. The combo makes an interactive storybook that parent and kid can hold together and play with.
The reasons I think this is a brilliant idea:
(1) it hides all the complicated technology (iPhone, multi-touch screen, proximity sensor), and present only a simple, tangible storybook that parent and kid can hold together and interact with.
(2) It can also minimize distraction to the kid: the object is perceived as a storybook rather than the iPhone itself. Hopefully it’ll also prevent kids from putting the iPhone into their mouth.
(3) Focus in the content: instead of being distracted by the handset, it brings back the focus to the story and the educational interactions, such as counting game (mathematics), touching the stars (spatial cognition and muscle coordination), or simply entertainment.
(4) Encourage closeness between parent and kid: the more tangible storybook format makes it easier for parent and kid to hold it together. If it’s just the iPhone handset then usually only one of them can hold it in hand.
 This package reminds me of Siftables: a cookie-sized computer that also encourage interactions in a tangible format. More information about Siftables here: http://siftables.com/