So as you have it, the size will change on an iPhone 3G but not on an iPhone 4 even though the screen sizes are about the same, but the resolution is higher on the 4. So if you had the devices next to each other, the text would be visually smaller one.

The specific device isn't important,  768 and smaller is just a very common resolution for mobile phones. So this is more about targeting the vertical orientation on mobile rather than a specific device.