It's called "marketing" or in other words how to lie to you so that you buy their ****.

http://www.displaymate.com/iPhone_3GS_ShootOut.htm quote:
"The iPhone uses 18-bit color, which provides 64 possible intensity levels for each of the Red, Green and Blue sub-pixels that are used to mix and produce all of the on-screen image colors."

16M colors listed on iPhone page is a number of colors used on software level, but when it actually being drawn to a screen it is converted to 18 bit image with dithering (google for that word finally!).

A good example is a black and white newspaper photo which only uses black ink, but due to the way it is used your eyes actually see a gradation of gray color - now take a magnifying glass and look at the way it is done.
Some spots are completely black, some are completely white, but some have small dots of both, so depending on how many of those near your eyes see it as some sort of gray. Dithering on your screen is similar, yet not the same as in newspapers.

N900 screen has higher resolution and therefore higher dpi - reason it looks better.

Read some wiki on how digital images are displayed on screen, then you'll understand better the difference and can actually decide if screen depth is as important as you claim it. Don't get me wrong, it would be cool to have a 24 bit, but as long as screen is only 18, making software calculate more than that won't make much difference.