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T-Mobile’s myTouch 3G with Google cell phone went on sale in the U.S. today, kicking off a new generation of competition with Apple’s iPhone.

The Android-based phone is available in T-Mobile stores around the country. The phone company kicked off the launch with a show where 100 skydivers dropped from airplanes over San Francisco. The whole idea of the multicolored skydivers was to show off the customization features of the myTouch.

I’ve played around with a white version of this phone for a while (It also comes in merlot, above, and black). By and large, it’s a good entry in the smart phone business that includes rivals like the iPhone and Palm Pre. It pretty much lives up to the demos we saw a few weeks ago.

This phone, built by HTC, is the second major launch from T-Mobile that uses Google’s Android operating system. The original T-Mobile G1 with Android debuted in October. You can expect to see dozens more models appearing around the world in the coming months. But it remains to be seen if Android has any hope of catching up with Apple soon.

The original G1 proved popular, selling more than a million phones quickly. But it had flaws. It had a physical keyboard and a touch screen that didn’t work so well. The myTouch screen is much better. On the G1, I tried to play Namco’s Pac-Man game but it just didn’t work that well. Every time I swept my finger across the screen, it didn’t recognize it and my Pac-Man character would get eaten. With this phone, the screen is much more responsive.

The virtual keyboard has the same problem that the iPhone’s has. It’s hard to type accurately on it. But it’s smaller than the G1 and so that’s one of the trade-offs you make with a virtual keyboard. The phone has some well placed buttons that let you go to your Home screen, raise a menu, go back, or search. It has a digital camera on the back and a ringer volume button on the side.

The myTouch itself costs $199 with a two-year plan. As a phone, it works fine. It gets reception in 176 cities.

It’s really easy to get apps from the Android Market. You can search quickly using “popular” or “most recent” filters. You push the buttons once or twice and the app downloads quickly, installs itself on your Home page, and is immediately usable. As far as convenience goes, that’s a good match for Apple’s AppStore. And while Apple has far more apps available — probably 10 times more — that’s not a big issue. There are thousands of apps available on the Android Market — many more than you’ll ever want to check out. (Google said there were 6,300 a few weeks ago).

The Android Market screen has a section of featured apps. It also organizes them by categories such as games or My Downloads. You can search for keywords by typing into a virtual keyboard on the screen. The top free apps include the Weather Channel, MySpace Mobile, Backgrounds, ShopSavvy, and US Yellow Pages Search.

I like using the Sherpa app from Geodelic that’s part of the AppPack that comes free with the phone. Sherpa is a GPS-enabled app that has a carousel screen which you spin around with your finger. You can tap on various categories and then spin the carousel to find out all of the places that are nearby. It’s very convenient when you’re in places where you don’t know what’s around you. And at some point, it learns what you like and shows you more of that.

Other free apps include imeem Mobile, which streams music to the phone; World Tour, which gives you access to live web cams; Phonebook, to track your contacts; FreshFace, which generates themes you can use to customize the phone; Movies by Flixster movie reviews; and other basic apps. It also has Google Search by voice, Google Maps with StreetView, YouTube and Picasa.

Other pros and cons of the new phone: You can get your email or go to web sites quickly. But the phone takes a fairly long time just to turn on. Still T-Mobile makes up for it in a big way. As you can see from the BillShrink.com graphic on the right, the average cost of owning a myTouch is $1,998 over a couple of years, compared with $2,359 for the Palm Pre and $2,839 for the iPhone 3GS. A lot of people may look at that price difference and conclude the myTouch is a bargain.

Here’s a link to our earlier video demo of using the myTouch phone. And the link to the BillShrink.com graphic which compares the myTouch to the Palm Pre and the iPhone is here.

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