Queue the "I dont want more MP, I want IQ". posts.
Queue "ugh, we need more storage capacity then" posts.
You're right, these are entirely valid concerns.
Its important to keep in mind that the vast majority of iPhone camera use does not benefit from large-megapixel cameras. The existing 8 megapixel camera in the late-model iPhones can print outstanding quality studio prints at up to 8x10. How often does the typical iPhone user do this? Rarely, but that doesnt mean it shouldt be capable of doing it. Its nice that the phone can, should you happen to capture that million-dollar-photo of your kids, a rocket launch, etc. 13 megapixel is in the real of reason, but 21 megapixels would allow you to print an outstanding" quality wall poster a capability that would probably be very rarely exercised. And pairing that 21 megapixels with todays tiny CCDs is an exercise in how to mismatch the components in a system so that you pay more but end up with a lower-than-expected-quality result (because the image quality is dragged down by the lowest common denominator in the component pipeline).
Where large megapixels is of some benefit is when using digital zoom. You can zoom in further without experiencing the effective reduction in pixel dimensions of the final image file. But again, if youre trying to take a picture of very distant object with a tiny iPhone camera sensor and lens, having a higher MP count just isnt going to help much.
In terms of storage, the concern is very real. Prior to buying the first iPhone, we had 1200 photos in our library. Now we have 28,000 photos, and if I had shot them all at 21 megapixels it would be a whopping 328 gigabytes or so depending on compression. Thats excessive for many reasons: Most of these photos arent worth printing, the iPhone can only store so many (for 16gb iPhones, you could run out of room after a days worth of vacation even if your phone was mostly empty), youd fill up a huge percentage of the typical hard drive (and backup drive) with data that is just likely never to be utilized, Apples new iCloud Photo Library would fill up very fast (and would be expensive), it would take much longer to sync/backup your device, etc.
Now, one way around that is to make the final image size configurable. Just like the auto-flash and HDR settings on the camera screen, provide a selection for MP count so parents just taking pictures of their kids rolling around the pumpkin patch for the 8th year in a row dont need to take 21-megapixel photos when they dont want to. Apple could also provide a way to scale down these images after they are taken (on the phone, so its possible to do it to clear up space for more photos without syncing). I would also add the ability to easily do this in iPhoto and iCloud as well, after the photos are transferred.