The new model comes with an A5 dual core CPU (The same CPU currently used in the Ipad2)
New 8Mp Camera with improved optics boasting an additional element in the lens giving improved sharpness and colour rendition.
New IOS5 (operating system) incorporating Icloud.
AND the NEW Siri artificial inteligence allowing you to control the phone by voice, ask questions and get answers in normal spoken terms and much much more.
Follow this LINK
go to the bottom of the page and there is a link to the video showing the key upgrades to the phone over the Iphone4 and there is also a video extolling the advantages/benifits of Icloud as well.