The reasoning behind it is this: the iPhone/G1 are very advanced, and cost a lot more than an average phone to create. However, you, the customer, are lucky: we'll subsidize the price heavily if you only sign this X year contract with your mobile operator.
I say, bull. The iPhone may have been very advanced when it came out. Now, it's been out for over a year, and in the IT world, nothing that's over a year old can be called advanced. G1 isn't much more advanced than the iPhone or any other top-level smartphone out there, either. These things do not cost all that much to make; and I don't really care how much money Google put into developing Android. If a device costs, say, 200 bucks to make (according to iSuppli, the iPhone 3G costs 173 dollars to make), why can't I buy it for 300 and stick a prepaid card into it?
The way I see it, there's no good reason, except for the fact that the mobile operators like to have as many long term contracts signed with their customers as they can, because it really makes those financial predictions for 2009 and 2010 shine. So, under the pretense that we're somehow "lucky" to get these phones at a subsidized price, we're being forced into 1 or 2-year mobile slavery. I've had a lot of wrong predictions about the iPhone way back when it was still just a rumor, but I got one thing right: there's no way this thing can succeed without the mobile operators getting a big slice of the cake.
Yes, you can buy a standalone iPhone 3G - in theory. But besides it being ridiculously expensive, it's also unavailable in many (most? all?) stores if you don't want to sign a contract. As far as G1 goes (please correct me if I'm wrong), it doesn't sound like it's going to be available without a contract at all.