The original EDGE iPhone and iPhone 3G use the same 400 MHz processor. Lets say the rumors are right and I believe they are that the next-generation iPhones CPU will be running at 600 MHz. In the same way that, say, a 90 MHz Pentium was more than 1.5 times as fast as a 60 MHz 486, the 600 MHz CPU in the next iPhone will be more than 1.5 times as fast as the current 400 MHz iPhone CPU.
Much of what the iPhone does now is constrained by its CPU. App launching speed, for one thing faster app launching should make it feel more like switching between apps and less like quitting/relaunching them. Web page rendering is also significantly constrained by the CPU. When I first used NetShare I was amazed at how fast Safari on my MacBook Pro could render web pages using the iPhones cell network connection. Web page rendering on current iPhones is hindered at least as much, if not more, by the CPU than by the speed of the 3G network.
John also believes that the new device will sport 256 MB of memory, up from the 128 MB, prices will stay the same $199 and $299, and storage will increase to 16 and 32 GB. He says that the design changes will be subtle and the colors will remain the same.
Internally he confirms that rumors about a magnetometer (a.k.a. a compass) and an improved camera that will shoot video with auto-focus are accurate.