First of all the screen uses what is being called a Retina display, Jobs claims it's better than OLED. The displays pixels are 78 micrometers wide which allows the screen to have 4x the resolution of the iPhone 3Gs. This means the screen has 326 pixels per inch, the naked eye can only see 300 pixels per inch, which means that the screen is better than human eyesight.
What this means in layman's terms is that the iPhone can handle 780p HD video, and according to reports the screen is amazing. The screen is 960x640 pixels in resolution and has a contrast ration of 800:1, pretty good for a screen so small.
This wont stop you from getting neck ache, and could possible make your eyes hurt even more when watching Lord of the Rings on the device, but at least that Blu-ray transfer you make will look absolutely amazing, and if you were to attach the iPhone to a HDTV then you could potentially have your own portable video library.
Check out the Apple website for more info.
