I think the "mid cycle" refresh, usually called by the appendix "S" (for speed), is a mild hardware refresh, but focused primarily on software upgrades.
The 3Gs offered better battery life to the 3G, a slightly better camera, a small SOIC speed bump, and a compass. The rest was all iOS 3 features.
The 4s offered a slightly better camera, a SOIC processor bump in speed as well as the addition of a second CPU core and better GPU, and fixing the antenna from antenna gate. The rest was all iOS 5 features, the main difference being Siri.
The 5s will likely see a small SOIC refinement / speed bump - likely due to the use of the A7 SOIC, which will be on a smaller die process. This in turn leads to a power reduction, so Apple can tout better battery life. Also likely a better GPU for better gaming. We may see a hardware upgrade to the camera, perhaps with respect to image stabilization, although it is difficult to imagine as they are already pushing the limits in that size camera package, but the A7 may have some built in hardware to help out the camera a little. Random features like a front facing LED for FaceTime or a backlit home button or built in fingerprint reader for security could make an appearance. The rest will likely be iOS 7 features, notably, improvements to Siri, Apple maps/directions/real-time traffic feedback, connected gaming, passbook integration/features, and integration with other products (car, tv, etc) to refine the Apple user experience.
The biggest ace in the hole I think will be built-in fingerprint reading for a 1-touch purchasing system (without passwords) that will work with passbook to make mobile payments easier and faster. Other than that, a lot of people probably won't see much reason to upgrade.
