This could be the 4 inch iPhone
One of the persistent rumours surrounding the release of the new iPhone later this year is that it will include a 4 inch screen. The biggest problem for Apple in implementing this though is the hundreds of thousands of apps that have already been build for it's current 3.5 inch iPhone. With the introduction of the iPad and it's much bigger screen it made sense that developers would design or alter their apps to take advantage of this bigger real estate, but to ask all of the developers to go back to the drawing board for a slightly bigger display simply hasn't seemed practical.
One way Apple could over come this would be to increase the height of the device only until it reached 4 inches diagonally. The Verge has come up with some really interesting examples below inspired by a caller named "Colin" on the Vergecast show who suggested the change:This would mean existing apps could simply run as normal with a black bar at the top or bottom until the developers were ready to update them.
This design would also make watching widescreen movies on the iPhone an even better experience. This is the first design I've seen that makes me think this might actually be the screen dimensions of the iPhone.
Even more interesting is that Daring Fireball's John Gruber who has been known to have inside knowledge has weighed in:
"Methinks “Colin” wasn’t merely guessing or idly speculating."