Screen size is the physical size of the screen, usually expressed in diagnal length, in inches. The Pre is 3.1", iPhone4/3GS are 3.5", HTC HD2 is 4.3"
This is all about quality of the image. Once the screen size is set, just how close together will the pixels be, to provide a smooth image?
The closer the pixels are to eachother, the harder it will be to see the pixels individually, which makes a crisp and smooth image.
-The iPhone4 has a 3.5" diagnal screen, with a resolution of 960 x 640. Doing the math, thats a total of 614,400 pixels for the whole screen, or about 176,000 pixels per diagnal inch of display.
-The Pre/Pre+ has a 3.1" diagnal display screen, with a resoultion of 480 x 320. Doing the math, thats a total of 153,600 pixels for the whole screen, or about 50,000 pixels per diagnal inch of display.
-The iPhone 3GS has a 3.5" diagnal display screen, with a resoultion of 480 x 320. Doing the math, thats a total of 153,600 pixels for the whole screen, or about 44,000 pixels per diagnal inch of display.
-The HTC HD2 (using this, because it is the physical model for most HTC large screen phones after it, such as the EVO) has a 4.3" diagnal display, with a resolution of 800 x 480. Doing the math, thats a total of 384,000 pixels for the whole screen, or about 90,000 pixels per diagnal inch of display.
-The much heralded AMOLED screen of the Samsung Glaxy S has a 4.0" diagnal display, with a resolution of 800 x 480. Doing the math, thats a total of 384,000 pixels for the whole screen, or about 96,000 pixels per diagnal inch of display.
Now, to put this all into something you can easily compare it to:
-I'm using a Viewsonic 24" diagnal monitor at 1920 x 1080 screen resolution for my computer. The total number of pixels for the screen is 2,073,600, or about 86,400 pixels per diagnal inch of display.
The best screens will have the highest pixel density.. more "dots per inch" (density). Small screens will be more effective and economcial to do this on, as they will require less total pixels, becuase they will cover a smaller area.
The iPhone4 screen's quality is no secret - they packed lots of pixels into a fairly small screen, relative to the competition. It CLEARLY has the highest density of pixels, even against a very high quality computer monitor!
One caviat, though - it DOES require more CPU power and will tax bettery life more to have higher screen densities for better displays, as the screen needs to be redrawn, pixel by pixel, as every single pixel requires an instruction on how to "appear" from the CPU - more pixels = more instructions required every time the screen refreshes (refressh rate for smartphones is 30 -60 x/second, I believe).
If you note, the iPhone4's screen resolution increased tremendously over all previous versions of the iPhone (they doubled thier total pixel coutn, using the same screen size, thereby quadrupeling thier screen density!!).
Of note: the Pre actually had a higher resolution than all previous iPhones - this is something I, myself, noticed visually last year, after the Pre came out - if you can believe it, the Pre had the BEST screen quality and resolution of any smartphone when it debuted in June/2009.
The bar has been raised by the iPhone4's release, and the HTC entries tried to anticipate that with thier hi-resolution specs and larger displays prior to the iPhone4's release - I can tell you, my daughter's HTC HD2 screen with Transformers running on it is nothing short of stunning!