Night mode is an automatic setting which takes advantage of the new wide-angle camera that's in the iPhone 11 and 11 Pro models. It's equipped with a larger sensor that is able to let in more light, allowing for brighter photos when the light is low.
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More Evidence of Cameras in Next Gen iPod Touch and Nano?
The first image from Uxsight is listed as a "New iPod Touch 3G" with "hold for a camera in the back" and comes with the following image:
The second case design was posted on DealExtreme and shows an "iPod Nano 5" case with another hole in the back that is presumably again for the camera:
The reliability of these early case designs has been mixed in the past. While they have been accurate with the iPhone 3G design, they were also responsible for many of the iPhone Nano claims which never came true.
Still, the design of the iPod Nano's camera location is consistent with sketches provided by iLounge in May. iLounge also reported that the iPod Nano would be getting a camera with its next revision.