Next-generation iPhones likely to focus on internal improvements.
Apple Reinvesting in Handwriting Recognition?
They even suggest that the recognition technology could extend beyond Mac OS X "to other applications and the iPhone."
Apple was one of the pioneers in handwriting recognition with their original Newton Personal Digital Assistant. While the original Newton contained a 3rd party handwriting engine that generated some early bad press, Apple later deployed their own much improved handwriting technology known as "Rosetta". Despite the remarkable strides that were made in handwriting recognition (Quicktime movie) in later versions, the Newton had a hard time shaking off the original bad press.
Rosetta technology has found its way into Mac OS X under the name "Inkwell", but requires a tablet to be installed for use. Meanwhile, the name Rosetta has been re-used in recent versions of Mac OS X for Apple's dynamic binary translation that allows Intel Macs to run PowerPC only applications.