Of course, the downside is that people sometimes buy a product that seems to be "as good as an iPhone," and they have no idea that their user experience is worse than the iPhone's, they just assume the iPhone works just as poorly as theirs.
I currently have to carry two phones, one is an Android device and the other is a Windows Phone 7 device, they both implement the proximity sensor and it works the same way as the iphone.
IIRC correctly HTC (back in the days of Windows Mobile 5) already employed this feature in their "slate" phones before the original iPhone was released. They then improved it by adding some rather unique features, like being able to flip the phone over (i.e. laying screen side up on a table) to silence/reject an incoming call.
Just to counter the "brilliance" part of your statement, there was an issue with the proximity sensor in iPhone 4 that took a couple of months to fix :)
I think this bug matches part of the issues people have with capacitive buttons - those buttons are prone to be active when they shouldn't causing mishits.