I had been very opposed to a larger phone, but then realized my right pocket doesn't need to hold anything else.

What's the cutout next to the camera opening for on the side of the phone?

I mean, who would have thunk to use the Chinese obsession with image and status through "leaking" these iPhone 5 cases into the Chinese markets? You couldn't get better promotional bang for your buck! Now everyone with an iPhone 5 case in China is scratching their heads and wondering "What is the actual guts of this case really like?" They'll likely pay ANYTHING to buy the real thing. I knew that laughing Cheshire cat smile on Jobs in the photo was basically saying that.

What is the point of Apple expending many months of engineering effort to make the iPhone a few mil thinner, and of a tasteful design, if people just put a big thick Play Doh coloured case on it?

My guess:
This isn't the iPhone 5 (or 4s). This is the "future product transition" Opponheimer alluded to inthe latest Quarterly call.

They're transitioning the iPod Touch out of the iPod category and into the iOS category. Some other thoughts:
* it will be marketed as a new revutionary/magical device, and not an "iPad or iPhone lite" - perhaps with some sort of new iName. This also gives the device more "premium" cred than simply the latest version of an iPod touch or repurposed 3GS.
* it will be a true world device aimed at the huge market potential in china, etc, but as a new device, it will also be desirable in countries that already have iPhone, iPod touch, etc.
* purpose is all-in-one pocketable media, gaming, internet, cloud, and phone.
* slightly larger form factor (than iPhone) is better for gaming, movies, etc. The 'smaller, thinner, lighter' design trajectory will remain with the iphone line
* smaller than 7" tablet = more portable; Larger than iphone = better for some tasks & gaming, etc. A 4" retina display would look amazing!
* larger size also makes more room for more phone radios, battery, or other tech
* available in two versions (like iPad): wifi only or wifi+(global phone radios) for prepaid phone/data market; + VoIP
* with ios5, deep cloud integration, entire apple ecosystem...
* This will be the primary "global" phone/iPod device
** in US or other countries where iPhone currently exists, if you want thinner, smaller, premium smartphone, (and you have/want a traditional cell contract (ATT, Verizon, etc)) you get an iPhone.
** if you want a larger, more media focused, but still pocketabe device (with option for prepaid phone/data), you get this new device.
** doesnt directly cannibalize iPad bc they still serve two distinct purposes

* perhaps iPhone only gets minor refresh +A5 this year (like 4s, although I think they'll name it 5) so it doesn't overshadow the new device too much and can reuse many existing components and design . Also maintains some manufacturing stability/continuity and saves $$ (which theyll be spending to make as many of these new tjings as possible. Then the ip6 gets big update + LTE, etc

* Rev 1 will have A4 and maybe repurpose some 3GS and 4 parts (cameras, rocker volume button, etc) . This would save $$ (both in design and manufacturing bc the infrastructure is in place) and still leave Apple plenty of room to upgrade aspects in future years to drive more sales.
* iPhone still retains ultra premium status by getting latest A processors, maybe more ram, premium materials, etc.

Forget fake Apple stores, China will be opening the first Iphone museum pretty soon taking credit for the whole damn thing before Apple's done with them.

Hmmm, kinda weird that they would be moving back to curved sides so soon. Oh well, I think I'll be more than happy with my iPhone 4 for another year or so.