This is advertising 101.
Any good advertisement appeals to both rational and emotional aspects of your life:
- This car moves you from place A to place B fast (rational)
- This car makes you look cool sexy (emotional)
With this in mind, "1000 songs in your pocket" appeals to the practical, rational side.
It does not make you feel like a better person, it just makes you think "Wow, I can put here everything I ever want to listen." So this part is the mistake in the analysis.
The product design and creative approach - specifically the iPod ads, which positioned the product as a part of a cool & hip look - are what made people feel they'll be way cooler if they owned that device.