Steve Jobs said 300ppi = retina resolution. So Apple could give the iPhone a 3.85" display with the same resolution and still call it retina. Eventually Apple will need to figure out things to change and screen size will definitely be one
I don't think so. The iPhone 4 form factor is almost perfect to hold in your hand. Apple didn't decide on the size arbitrarily, they decided based on a number of focus group tests and research. People actually prefer this size. I have small hands and can't imagine holding something larger. Even my business partner's Blackberry Curve feels unwieldy compared to my iPhone 4. With that said, obviously Google and its partners did some research on their end as well. If I had to compare the two different sizes, I'd say Apple focused more on what feels comfortable as a phone while Google/partners focused on what may be a better interactive experience. Both are valid perspectives.