Yes, you need a Mac unfortunately. I wish I had a Mac so I could port some projects over to the iPhone. You should check out the video on the SDK page where the iPhone SDK is discussed in detail. Here's the gist of what I saw.
- The SDK is free.
- The SDK comes with a full iPhone emulator so you don't have to even own an iPhone.
- You can use the debugger from the IDE on the iPhone itself with a USB cable-- that is pretty sweet.
- It's free to sell your game on the upcoming Apple marketplace (kind of like Xbox Live I assume.) You set your price and Apple takes 30%--- that is VERY fair. You can even make your application free and then you don't pay.
- If you want to be able to transfer your program onto a physical iPhone for testing and developing (again, you don't need to as there's an emulator), you have to sign up for their version of the Creator's Club for $99 (not sure if this is yearly). That's pretty decent.
- You can also develop for the iPod Touch.
I probably missed a bunch of things, but yah, now's the time I'd love to own a Mac