Next-generation iPhones likely to focus on internal improvements.
Video Demo of What a 4" iPhone Screen Looks Like in Action
In order to provide a better demonstration of what a 4" iPhone screen would feel like, MacRumors has had this video created to show it in action:
The video shows how the new 4" Home Screen would look. The extra space would naturally allow for larger app folder sizes. Games and other apps would have to be modified to take advantage of the extra real estate. We imagined, however, that existing apps would be "letterboxed", simply leaving empty black space at the top and bottom of the larger screen. Apple used a similar approach when supporting iPhone apps on the iPad.
The new 1136x640 resolution is almost exactly the same 16:9 ratio found on many widescreen monitors and televisions. This will fit many widescreen movies more naturally.
Some of the behavior in the video is speculative, but we believe it is likely representative of how a 4" iPhone would work. The evidence of such a screen has been overwhelming with part leaks and evidence of iOS support. Apple is expected to launch the new iPhone on September 12th.