And I think the real point of contention was that Eric Schmidt was a member of the Apple board starting a year before that and as such had seen early iPhone prototypes. That in particular is what Jobs was angry about.
I can guess why that's a much bigger point of contention.
Steve Jobs must have really sold the board on the viability of next-gen smart phones: "guys - our work on iPods shows us we are just about at the point where almost-PC-class processors, RAM, and hard drives can be crammed into a mobile-phone sized package, without wiping out the battery in 12 hours. You know what will happen next?"
If that was the reason Google put so much effort into Android, then Google effectively stole Apple's strategy. Sure, some random Googlers would have thought of it, but it may not have been sold as well at the top level. Remember, Steve Jobs was an unbelievably good strategy salesman.
It's inevitable then that Android would follow the market leader - that's what products do.
Google had already bought Android and bet on next-gen smartphones well before Eric Schmidt joined the Apple board. And that bet was already serious and high-level. Schmidt wasn't involved in the acquisition, but Larry Page was. They were also, correctly, talking about mobile as the "next great frontier of search". If that wasn't a big deal at Google, I don't know what could be.
