iPhones have multitasking for the core applications (browser, media player, calendar, email, etc.), but not for any installed applications. Even then, it is very limited, and things close seemingly on their own most of the time (because, you know, Apple is looking out for you, they know what you need a lot better than you do). That is the big difference between iPhone OS and Android. Wanna listen to locally stored music while browsing the Web? You can do that on both. Wanna listen to music through the Pandora or Last.fm app? Sorry iPhone users.
Here is a scenario I like to tell to iPhone users when they ask me what's so great about Android. Imagine you wanna play a game, but you are feeling nostalgic, so you wanna play a Sega game from a while back. You fire up the emulator, and start the good Mortal Kombat 3, with all the controller keys conveniently mapped to your physical keyboard. After a little bit, your LED blinks because an email arrived. You are just about to FINISH HIM, but you think it may be an important email that you've been expecting. You click the home button, get out into the menu, launch the Gmail application, and read the email. You decide to reply, but you need to include a link from a webpage. You go to the web browser, copy the link, paste it into the email (that you find in the exact same state you left it) then send it. After you close the Gmail app, you decide that MK deserves some heavy metal from your Metallica station in Pandora. You launch the Pandora app, click play, then go back to your game (which was left in the exact state you left it). With iPhone, not only doing everything would take twice as long because of useless transition animations/fade-ins/fade-outs, the internet connection would likely be down, so it would take you an hour to load the website to get the link, and another hour to type your email on the onscreen keyboard. Not to mention you would lose your fight because you had to exit your game. Wait, you wouldn't even be able to play that game because console emulators are not legal under The Apple App Constitution.