The Android smartphone market is small, but growing steadily. I recently reviewed T-Mobile’s G1 Android phone, and called it a worthy iPhone challenger.

The next generation of the Android is out now, in the form of the G2, which is available in the HTC Magic (the T-Mobile G2 is expected soon.)

The big upgrade (if you can call it that) in the HTC Magic is the lack of hardware keyboard. It’s now onscreen only, like the iPhone’s. It has the iPhone’s ability to magnify the key pressed, helping cut down on errors. Whether you like that or not is strictly a matter of preference: I do like it, but I like many things about a hardware keyboard as well. The drawback of hardware keyboards is the form factor; it needs to somehow slide out or down, which tends to make those devices bulkier.

The other major upgrade from the earlier Android phone is that it has more RAM and ROM; what that means for you is that it should do everything it does faster.

Android has an open source application store; the upshot is that there are lots of apps available, and they’re not as tightly controlled as the iPhone’s App Store. The downside is that while there’s a good selection, it still can’t touch the number of available programs as Apple’s. And the lower level of control exercised over what’s available means more chance than an app could cause stability problems on the phone.

The HTC phone is attractive, with a glossy black finish and raised silver keys at the bottom. HTC has elected to make memory available in the form of microSD cards. This is a decision decision I don’t like; yes, you can ultimately add more capacity by adding cards, but who wants to swap tiny little SD cards in and out? And keeping track of the fingernail-sized cards is difficult as well.

The HTC is about $200 with a two-year contract, and looks like it will cost less than the iPhone over that two-year period, so if cost is a big factor for you, strongly consider the HTC Magic.