These prototype phones are floating around Apple HQ in thick, locked shells in order to disguise the exterior design to "undisclosed" employees. We know of two next-generation iPhones in testing with a larger display: the iPhone 5,1 and iPhone 5,2. These phones are in the PreEVT stage of development and are codenamed N41AP (5,1) and N42AP (5,2).
As previously rumored the prototypes are said to have a larger display.
Both of these phones sport a new, larger display that is 3.95 inches diagonally. Apple will not just increase the size of the display and leave the current resolution, but will actually be adding pixels to the display. The new iPhone display resolution will be 640 x 1136. That's an extra 176 pixels longer of a display. The screen will be the same 1.94 inches wide, but will grow to 3.45 inches tall. This new resolution is very close to a 16:9 screen ratio, so this means that 16:9 videos can play full screen at their native aspect ratio.
The prototypes are also said to feature a smaller dock connector and keep the home button.