The Wall Street Journal is reporting today that manufacturing of the touchscreens for the iPhone 5 has begun, and that it incorporates "in-cell technology," which allows the screen to be thinner and also improves image quality. Basically it incorporates touch technology right into the glass rather than having a separate layer for it. Thinner is better, especially since an LTE phone with a larger screen would require a larger battery. You have to make some components smaller to accommodate it. This may also be part of the reason for the new, smaller "mini-dock" on the bottom of the phone. The Wall Street Journal also notes that another advantage is that in-cell technology helps to streamline production by merging the touch panel with the LCD panels such that Apple's suppliers are then just manufacturing a single panel.
A graphic on AppleInsider shows the relative sizes of the touch panel and LCD in the current phone, and how much thinner it will be using in-cell technology.
And speaking of the iPhone 5, a recent analysis by Piper Jaffrey has estimated that Apple will sell 80 million of the devices, according to CNNMoney. This estimate is based on results of a survey of 400 consumers, which found that 65% said their next phone would be from Apple, while just 19% indicated their next phone will be an Android phone. Half of those who indicated they'll be buying an iPhone said they're going to wait for the iPhone 5. An amazing 94.2% of iPhone users said that they'll be sticking with the iPhone for their next phone.