Just had a quick glance at the new iPhone specs.
Interesting that it's just an incremental advance rather than a serious overhaul - I was expecting either a mini/nano version, or a souped-up one.
Things that are in it: MMS, cut & paste, 3MP camera, more battery life, compass, video, more memory, faster processor
Things that aren't in it: HSUPA, flash, 5 or 8MP camera, WVGA screen (800x480), multitasking (I think), slide-out QWERTY pad
My take is that it's probably enough for many existing owners of the 2G iPhone to upgrade (most of the 3G owners still have another 12 months contract to run anyway). Also looks like it's been priced to compete against some specific rivals (notably the Palm Pre) and extend market reach, rather than be the ultimate heavyweight ultra-spec superphone.
Probably makes a lot of commercial sense, as I suspect Apple would rather have 50 million normal midrange users, rather than 20 million ubergeeks. Given the economy, they probably made some pragmatic decisions about designing it down to a price, rather than going the Nokia route and putting in everything but the kitchen sink.
On the topic of which, I should be getting a shiny N97 to play with soon. I also need to change my "normal" voice/SMS phone (currently an S-E C902) as it seems to be getting progressively less reliable & crashing a lot. Assuming O2 keeps the Apple contract, I'm probably tempted by the iPhone S, assuming I'm not hammered too much for an early upgrade.