The iPhone that Apple will likely be releasing in June has been popping up all around the southern San Francisco area. What kind of sweet upgrades will this thing have that will make those with older iPhones want to upgrade?
Video. Imagination technologies will likely make some kind of video processor that will put the current one to shame. Multi-core? Perhaps, but it had better not drink too much battery. Bonus points for OpenCL capabilities.
Form factor. Apple has this weird "Sneeches" thing going on with the iPhone and iPod touch. They both seem to be following the other adding each other's form and features. The iPhone 3G certainly took some of the original Touch's looks but the 2G touch has a metal backside like the original iPhone.
To that end, I think the iPhone will be thinner. I really hope Apple opts for a higher resolution display in close to the same form factor just double the pixel density. It doesn't seem like it is "in their DNA", however, and they've been talking up the App Store as a place where you design an app for one resolution.
Camera. Just a bit better resolution and quality would be a real benefit. Maybe a nicer lens as well. Oh, and video capability? Don't make me a jailbreaker.
Software. With the faster processor, Apple will be able to do things they haven't with the current design. Number one on that list is Flash. Flash is a resource hog and no matter how hard they try, I don't think Apple and Adobe can get it to run effectively on the current hardware. With the ARM Cortex line of processors, it is more than doable. I don't expect to see any java capability but it isn't out of the realm of possibility.
Cut and paste has been the thorn in the backside of many iPod touch/iPhone users. I think Apple will finally have it in version 3 of the software. Greg Joswiak, Apple Product Head said they are working on this, as well as turn-by-turn GPS.
Maybe AT&T will allow tethering without jailbreaking as well. For a price of course.
Push notifications? This has been the biggest vaporware in Apple's iPhone platform so far. Originally scheduled for September 2008, Apple doesn't even mention its existence anymore. I hope we see it in iPhone OS 3.0
Gaming. Apple is touting the iPhone's gaming ability at every turn and the new hardware will let them step up that effort. But the biggest weakness of the iPhone as a portable gaming platform is lack of real buttons. Admit it: the feedback helps. I am hopeful that Apple adds a few more buttons - they coulld also control the iPod functionalty (play, pause, forward, back).
This 3.0 version of the iPhone will be a departure from the previous iPhones in that the software won't be backward compatible - or at least feature complete (for instance Flash won't run on previous versions). This might leave the door open for Apple to produce two lines of iPhone and sell one at a lower price or to emerging markets.