Apple isn’t trying to replace Flash with its own proprietary thing. They’re replacing it with H.264 and HTML5. This is good for everyone but Adobe.
And yes, I know Flash does much more than just play video. But that’s the main thing everyone is talking about when they talk about Flash not working on the iPhone — video. And when you talk about others uses for Flash, you’re talking about serving as a software runtime, and whether you like it or not, Apple has a clearly stated opposition to third-party software runtimes for iPhone OS, and that policy seems to be working out pretty well for them.