This shouldn't come as a shock to anyone.
1. iPhone games cost less to develop (cheap dev licenses).
2. iPhone games can be updated.
3. iPhone games are marketed to all iPhone users (tempting for those who do not usually play games on phones)
4. iPhone games contain the largest variety. From 15 hour RPGs games like Final Fantasy 1 & 2, random board games, stratagy games, 1 minute games, etc..
5. iPhone games are cheaper.
6. iPhone games have playable demos (Lite).
Welcome to the next gaming frontier. Online downloads is far more user friendly, quick, and updatable. You don't need to drive miles to pick up a game, you can just sit at home and download it. I don't see Gamestop being viable in the near future.