Android is a mobile OS (operating system) designed by Google and many of it's partners in the Open Handset Alliance. It's easily the best OS for mobiles which is why it's used by so many heavy hitters, manufacturer-wise. For example - companies like HTC, Motorola, Samsung, Sony Ericcson, LG, Dell and Acer have all released Android phones to date.
One of the main benefits of Android is that it comes fully integrated with Google services like Search, Google Maps, Google Navigation, YouTube, Gmail, Google Talk, etc. It has it's own Android Marketplace for downloading additional software (much of which is free), which currently contains over 50,000 applications.
Rukas can show you how Android works on his Motorola Backflip - all the phones that Sandeep, Masta and I mentioned run on Android.
I see that 3 are offering free XPERIA X10's for $79/month contracts - I think this is a great offer as the X10 is a very powerful device.
That $60 plan on Telstra with the HTC Desire that masta linked to is also a very good deal. The Desire is one of the newest and fastest Android phones out right now, and ships with Android version 2.1, and rumored to be getting Android 2.2 (the latest version) within the next few months.
The X10 is currently still on 1.6 but getting 2.1 very soon. Backflip, the same.
If you are willing to go with Telstra - I would get the HTC Desire. My cousin just got one, and it's definitely an amazing device.
Here's what it looks like in action: