Originally Posted by Faterson
It will either be double the resolution, or nothing. Fiddling around with any resolution in between, would cause enormous problems for app developers. The only reason Apple could increase the resolution on the iPhone 5, is because they also changed the device's aspect ratio. (And now all apps need to readjust to the new iPhone 5 aspect ratio, creating extra work for developers.)
Apple really have painted themselves into a corner with their screen resolutions. I'm not an app dev so I don't know many details about app guidelines but locking apps to specific resolutions is silly. Sure, use the old iPhone res as a minimum size, then make the apps resize, using vector based graphics and such.
If they bring out a five inch iPhone (I really hope they don't, I like being able to fit my phone in my pocket) they'll have to drop the DPI to keep the existing res. Either that or use some super über retina screen. Given the amount of apps available it's all a bit FUBAR for screen resolution upgrades. This makes me sad as I'd like a slightly higher res screen on the Mini. I don't think Apple can make the larger jump to an eight inch retina screen anytime soon.