The ARM is building up from a low-power base, and next year will bring dual-core ARM Cortex A9 chips (with integrated graphics, audio, video acceleration, DSPs, and all the I/O a small device needs. The A9 is an out-of-order CPU as well, whereas Atom isn't.
Intel will be coming out with a new, lower power Atom that integrates the graphics and memory controller, but they have the problem that they need to build down from a (from a smartphone perspective) high-power base. Each process shrink helps them of course, as long as they stand still in terms of clock rate.
I think it will be around 2013 when Intel actually has a chip that can compete with ARM in terms of size, power consumption, capability, suitability. But there will still be a cost issue - umpteen ARM vendors, some of whom make the chips for themselves at cost, versus Intel who is well used to large profit margins... Nevermind an established ARM infrastructure (Android, Symbian, iPhone OS, Blackberry OS, Palm webOS) with 5 years of application back catalogue or more.
