It's an improvement, for the iPhone. Unfortunately, the iPhone has been playing catch-up for awhile now, and it continues to do so. Assuming this is really the next version of the iPhone...
Front-facing cam: Just like the other top new phones this summer.
Expandable memory: Welcome to the party, glad you could join us.
Improved camera: It's still only 5MP, while there are now phones with 8MP cameras capable of 720p HD video.
Higher resolution screen: That's nice, but I'll take a larger screen instead. There are now phones with screens almost an inch larger than the iPhone, and yet the phones themselves are barely bigger because the screen actually goes to the edges rather than wasting space like the iPhone does.
Then there are the features it's missing that are available elsewhere... Super AMOLED screen, kickstand for easy media viewing, HDMI out so you can watch the videos you've taken with your nice HD phone cam on your HDTV... the list goes on.
Finally, there are the software issues. The iPhone is finally getting some sort of multitasking, and yet it will still be the weakest multitasking implementation of all the smartphones. The UI, while intuitive, is getting old and lacking features. Where the iPhone only gives you a list of apps, Android gives you a list of apps but also provides 3-7 screens that you can put widgets on so that you rarely ever have to even open the apps. It is totally customizable, while iPhone allows for almost no customization at all. (I should mention webOS is great too, but since Palm is on the brink of collapse it seems pointless to talk about it right now.)
Just about the only thing I think iPhone has going for it anymore (aside for good marketing and brand recognition) is the app store, and that's looking to change quickly. The Android Market is growing exponentially (though it has just as much crap as the iPhone App Store), and Google is actively recruiting developers of popular iPhone applications, while those same developers complain about the lack of attention and respect Apple gives them.
Basically, the new iPhone is, at best, no better than the alternative options available, and in many ways still one step behind. It will be successful because most people still think that the iPhone is the best option out there and Apple has done a great job injecting the iPhone into the public consciousness. That won't last forever. It's going to take awhile, but Apple is going to have to start innovating again, or else people will slowly begin to realize that there are superior options available.
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PonyPotato: If you're on Sprint and are in the market for a new phone, you should seriously consider the
HTC Evo 4G. I'll be switching to Sprint this summer, in part because of that phone. I started my research into the upcoming phones and their carriers with all options open, including possibly getting an iPhone. It didn't take long before I narrowed in on Sprint and the Evo. Since you're already on Sprint, I don't need to go into why I've determined Sprint is actually a good choice for a lot of people, and I'll summarize the Evo by simply saying it looks like it will be the best phone on the market this summer and possibly even into the fall. It's only slightly larger than the iPhone yet its screen is almost an inch larger, it will be capable of recording HD video and will have an HDMI port so you can connect it to an HDTV, it will have a kickstand for when you watch video on the phone so that you don't have to hold it the whole time, and it will have pretty much everything else described in the next iPhone above. It will also be Sprint 4G capable, so when Sprint rolls out their 4G network to your area - very likely before any of the other providers get around to it - you'll already be ready to take advantage of the faster speeds.