I'll give you my brief experience as I bought my first smartphone last month. I am using the
HTC Droid Incredible through Verizon. It runs Google's Android OS and came with Android version 2.1 installed.
In addition to the cellular 3G network, this phone will also use your wireless network (I think just for Internet access, not phone calls) if within range. You are right about these phones being more expensive. This one was $199 with a 2-year contract. I am paying the same monthly price for my regular phone plan, but in addition to that, Verizon's basic unlimited data plan is $29.99 per month, so right there is $30 more per month than I was paying before. I seriously considered Sprint because of its unlimited plan. I think that's probably the best all-inclusive plan available.
As for whether the extra monthly expense is worth it, I'm not really sure yet. It's very cool to be able to check facebook, gmail and just about anything else online anywhere you are. There are some cool apps you can download for free that let you connect with friends (Gowalla, Twitter) synchronize data with your PC (Dropbox) or any number of other things.
The camera is decent for daytime pictures and allows easy uploading to facebook or sending via gmail. Get used to a shorter battery life, as these phones can really suck up power. I have to recharge at least every two days. You can find apps to help you manage what is running on the phone (Advanced Task Manager) that will prolong your battery life.
The thing I have found so far is that this phone has so many possibilities and features that I simply haven't had time to explore them all. It's very cool, but in order to get the most out of these phones I think you have to really dive in and learn and explore. That's not bad, I just haven't done it yet. Most of my friends here have smartphones, either iPhone or other Android-based phones, and they have helped me find some cool apps.
I'm not sure how you feel about the "closed" (Apple, Windows) vs "open" (Android) software development/app distribution issue, but I chose Android over Apple partially because I want to support an open OS. Apple does provide a more polished experience, however. I think both phones are great.
If you have any other questions, let me know. I'm still learning about this stuff.