Fourth and fifth
Fourth, there's battery life.
To achieve long battery life when playing video, mobile devices must decode the video in hardware; decoding it in software uses too much power. Many of the chips used in modern mobile devices contain a decoder called H.264 - an industry standard that is used in every Blu-ray DVD player and has been adopted by Apple, Google (YouTube), Vimeo, Netflix and many other companies.
Although Flash has recently added support for H.264, the video on almost all Flash websites currently requires an older generation decoder that is not implemented in mobile chips and must be run in software. The difference is striking: on an iPhone, for example, H.264 videos play for up to 10 hours, while videos decoded in software play for less than 5 hours before the battery is fully drained.
When websites re-encode their videos using H.264, they can offer them without using Flash at all. They play perfectly in browsers like Apple's Safari and Google's Chrome without any plugins whatsoever, and look great on iPhones, iPods and iPads.
Fifth, there's Touch.
Flash was designed for PCs using mice, not for touch screens using fingers. For example, many Flash websites rely on "rollovers", which pop up menus or other elements when the mouse arrow hovers over a specific spot. Apple's revolutionary multi-touch interface doesn't use a mouse, and there is no concept of a rollover. Most Flash websites will need to be rewritten to support touch-based devices. If developers need to rewrite their Flash websites, why not use modern technologies like HTML5, CSS and JavaScript?
Even if iPhones, iPods and iPads ran Flash, it would not solve the problem that most Flash websites need to be rewritten to support touch-based devices.