The 3Gs has a much faster processor than the 3G. The 3Gs can achieve 7.2mbps on HSDPA while the 3G can only achieve 3.6mbps. The 2.0 megapixel camera of the 3G has been replaced with a 3.0 megapixel camera that supports video recording in the 3Gs The 3Gs can now support OpenGl ES 2.0 while the 3G can only support 1.1. The 3Gs has voice control and a magnetic compass which are not available in the 3G.
It Depends on how many GB.
iPhone 3G 8GB costs AU$199, the iPhone 3GS 16GB AU$349, and the iPhone 3GS 32GB AU$549 all on contract. Contract free, they are AU$749, AU$929, and AU$1129.
Do you know the price difference?