Correct.
The problem that we're approaching is that as displays start using ever higher resolution, the elements displayed on those displays become physically smaller and smaller. If the iPad 3 features a 2048 x 1536 screen (double the resolution of the iPad 2), then low-res elements such as small pictures will appear smaller by half on the iPad 3. Even worse, the user interface begins to suffer -- a character of text that's 12 points in size would be half as large on the double-resolution screen.
This is why OS X 10.7 (Lion) is almost certainly going to include "resolution-independence" technology. For example, instead of the menu bar at the top of the screen being a fixed height which becomes ridiculously small on high-res displays, it will include an option for such screen elements to size themselves as a certain percentage of the screen size. Instead of being a fixed 40 pixels in height, you might see a menu bar set to be 2% of the screen height. By switching to this sort of functionality (which requires a LOT more computation to pull off), screens with higher DPI cease to be a problem -- we can all have displays that are "Retina Displays" at any size. (Fixed element items such as images will still have to be scaled up to appear correctly.)
On the iPad and iPhone, it's a bit easier to handle the screen elements -- but things that aren't part of the OS or the app (such as images on a web page) are still going to have issues if the resolution goes too high.