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The first mobile phone powered by Google was launched today, ready to do battle with Apple’s iPhone for the top spot on tech addicts' Christmas gift lists.

The long-awaited smartphone, unassumingly dubbed the T-Mobile G1, was revealed at a press conference in New York this afternoon. Amid the kind of whooping and cheering that usually accompanies the launch of new Apple products, Google revealed the first handset to run on ‘Android', the search giant’s operating system for mobile phones.

It goes on sale in the US next month, and is expected to arrive in British stores by early November.

The arrival of Android signals the opening round of a battle between Google and rivals including Apple, Microsoft and Nokia to create the software that powers the next generation of internet-enabled mobile phones.

The G1 will be in direct competition with similar handsets, such as the iconic iPhone and office-worker’s favourite BlackBerry. The G1 is a hybrid of those phones, with the new device having a touchscreen like the iPhone, a slide-out qwerty keyboard and a ‘trackball' like the Blackberry.

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The phone will be available exclusively with T-Mobile in Britain, and will be free to customers who must sign up to a 18-month contract that costs £40 a month. It is made by HTC, a Taiwanese company.

In a direct challenge to Apple’s iPhone and iPod, the G1 comes with an application developed in association with Amazon.com, giving customers easy access to the six million tracks in Amazon’s digital music download store.

At the touch of a button, the phone will run Google’s range of online applications, such as Gmail (Googlemail in the UK), its personal e-mail service, and YouTube. The G1 also includes ‘Google Maps Street View', which lets users explore cities virtually using street-level photographs.

But the buzz surrounding the G1 has less to do with its features than with Google’s real innovation, the Android operating system that runs the phone. The company’s ultimate aim is to get more people online, and so able to use search and advertising services from which it makes its money.

There are more Android-powered phones to come, with LG and Samsung set to reveal handsets that run on the software next year.

Google also hopes to take the lead over Apple by making Android ‘open source', meaning that no one will be charged to use it on their handset or for writing applications for it. This means that anyone can write programs that will run free on an Android-powered phone.

So far, free applications that have been created for Android phones include ‘BreadCrumbz', a GPS-style navigation system that not only gives users drawing of the route, but also includes real-world photos of the surroundings, helping drivers stay on the right track. GeoLife, is to-do list that is aware of your location, so a user will be able to get a reminder to do the shopping when he or she is near a supermarket. Another application is ‘TuneWiki', a karaoke player for mobiles which synchronises written lyrics to a song’s YouTube video.

"Increasingly, connectivity does not just mean a phone call, but rather access to the world's information," said Andy Rubin, senior director of mobile platforms for Google. He added: ‘With Android, we've opened the mobile web not ony for millions of users, but also to mobilise the developer community that understands the next most important platform in the world rests in the palm of our hand."

Developers have already been creating similar applications for the iPod and iPhone, with users of Apple’s devices downloading the 3,000 applications available through iTunes more than 100 million times since they were available in July this year.

However, Apple controls what applications are available to users, as they must be downloaded through the iTunes online store. Applications for Android phones will be available to be downloaded from any website, by anyone. Google believes this is a more democratic approach but critics say Apple’s system allows it to exercise some quality control.

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