Wired has the scoop on what could have been the sexiest Linux device of all time: Apple's iPhone.
Given Linux's momentum in embedded devices, Linux actually makes a lot of sense as an operating platform for the iPhone. I was involved in building the first Linux-based smartphone, the Sharp Zaurus, and Linux has only expanded in embedded devices since then.
But Wired makes a good (and very funny) suggestion as to how Not-Invented-Here-Jobs must have reacted to the idea of Linux:
In fact, I like to imagine the scene: Fadell mentions the "L" word. Jobs' eye twitches, the flinch almost imperceptible. He motions Fadell to continue and, a few moments later, stands up casually, apparently to stretch his legs. Then, suddenly, a folding chair is in Jobs' hands, swinging wildly towards Fadell's corner of the room. Jobs smashes the entire presentation - hardware prototypes and all - and screams at Fadell to "Get the **** out. Get out now!"
Classic, and quite possibly true.
Just as Apple used BSD software at the heart of its OS X operating system, it could easily have used Linux. The difference, of course, is that while Linux would have provided the technical quality Apple sought, its licensing would have been a non-starter. With Linux (and its GPL license), Apple would have had to make its modifications/derivative works open source, which the liberal BSD license does not require.
I doubt the conversation ever would have moved beyond that point. Apple does contribute to various open-source communities, but the core "secret sauce" for one of its biggest products ever? Not going to happen.