Yes, while occasionally some people have confused that small stripe as a Proximity Sensor, it is actually a recorder that pipes everything you say and do, along with your location (being detected and uploaded to Apple constantly) back to Steve Jobs who personally tracks each and every iPhone user on the planet. That is really why he has had to take time off, in order to keep up with all of us.
Either that, or it is your end of your own personal Wormhole to another dimension, to be activated with a future edition of the firmware and the first $1M App!