> To present something less extreme than an 8086 running DOS and Windows 1.0, consider that in 1999, a PC with a 366 MHz processor, 64 MB of RAM, and a 6 GB hard disk was quite adequate for browsing the Web, running office applications, playing MP3s, encoding said MP3s (faster than real time), and developing software -- all at the same time if I wanted to.
A 2007 iPhone with similar specs could do all that just fine. Probably the biggest difference is what we ask of our systems. I'm typing this into one of eight browser tabs, each running some JavaScripty thing or another. I'm also running an end-to-end test suite of the software I'm working on today, and that suite hits PostgreSQL, Mongo, Redis, and some other stuff all running on the same laptop. There are a bunch of Internet-connected apps doing their own thing in the background - polling Twitter, listening to Hipchat conversations, and downloading a playlist from my iTunes Match account. And through all this, I have an instantly-reactive, shiny desktop with drop shadows and transparency in quite a few spots.
Maybe the difference is that we expect our computers to wrap around our needs now and not vice-versa. It's been years since I quit one app so that I could run another, and I'd upgrade my laptop in a heartbeat if running that test suite made other stuff sluggish. I effectively don't have to care about my machines limitations anymore and I like it that way.