"The Nexus One belongs in the emerging class of devices which we call ‘superphones,’ with the 1GHz Qualcomm Snapdragon chipset making it as powerful as your laptop computer of three to four years ago," said Andy Rubin, Google's vice president of engineering for mobile.

"It's our way to raise the bar on what's possible when it comes to creating the best mobile experience for consumers."

The Nexus One is an improvement on the iPhone in many respects -- as well as having a faster processor, it also has a large bright 800x480 pixel screen, memory expandable by the user up to 32gb as well as a removable battery.

The software on the Nexus One also puts the iPhone to shame in some areas -- voice recognition features allow users to dictate and send emails and instant messages.

“The evolution we’ve seen around voice recognition in the past year or two has just been phenomenal,” said Erick Tseng, senior product manager at Google.

“We wanted to take it to the next level.”

Google have seen the success of the iPhone's App Store and have launched a retail site to offer apps as well as sell the phone hardware itself.

The Nexus One will be sold by Google in an unlocked version for $529 -- it will be available from $179 with a two-year contract from T-Mobile USA.

A deal with Vodafone means that the Nexus One will be available in Europe later in the year.

Although some see the Nexus One as a direct competitor to the iPhone, Google hopes to sell much more advertising served via the phone.

"This is the next front of our core business," said Rubin.

When Rubin was asked if a free ad-supported phone was a possibility in the future, he was reticent to disclose future strategy.

“The first baby step here is: Let’s get an online story going and let’s figure out what they best way to enhance it in the future."