This makes me think, is there a way to play music on the iPhone's browser? I suppose not - but ultimately this move could strengthen the mobile web apps approach to things.
Yes, MobileSafari plays music (with <audio> and direct links to MP3/M4A, etc.) quite well. The biggest issue with this as a path to replace native audio playback apps is how the browser manages resources for background tasks (tabs): they are thrown into a single pool and garbage collected when resources become constrained.
This directly mirrors how the OS manages suspended/background apps, but with the critical difference that the OS specially treats apps which are registered for different background services, like background audio playback, avoiding eviction for things like this which are effectively under active use, even when they are not on-screen.
The solution, I'd argue, is for Apple (and the web working groups, in general) to bring the same sorts of OS design concerns to browsers—in this case, richer interfaces for more intelligent handling of background tasks by both the runtime and the tasks, themselves.
I was only thinking recently that "background tasks" might be a missing ingredient for HTML 5. They probably don't make sense with traditional desktop browsers, as it is sufficient to keep a tab open with the app. But on mobile browsers it is a different story.
They aren't as essential for desktop browsers (now), since the relative resource constraints on a given tab are so much smaller, but just as relevant as "desktop" runtimes scale down in power/up in efficiency demands, and as the apps run within them scale up in resource demands. Just look to how much RAM your 25 browser tabs burn, and how warm a single tab with Flash ads can keep your MacBook Air.
There is, but it's crippled. Only the simplest of controls are exposed to Javascript, and the music stops playing when the app closes or the device locks.
Not true. I'm working on a music webapp for iOS and the audio keeps playing if you exit Safari/lock the device. It's actually quite annoying as the only way to stop the music is to open Safari and pause the audio.