the next iphone firmware update, 1.1.3, will use cell tower data to get a physical location. i expect it will also use wifi APs at some point for even better location in some cases.
when will the iPhone take the next step, the big step, to being able to share your location with others? the android platform is just around the corner. as soon as its out, a location sharing app will come out soon afterwards. i would like to optionally publish my location and be able to see a city map of my friends. that one feature will singlehandedly take cell phones to a new level. it'll be a common feature and push cell phones back to where they belong - handheld computers/PDAs that happen to have a cellular radio as one of many features.
MacWorld possibilities, in order of preference: A macbook subnotebook (7"-10") computer with tablet screen The developer's kit for the iPhone The next model of iPhone (GPS, more ram, better camera, SD card) The iPod Touch with Bluetooth Hardware refresh for 12" and 15" MBP The next model of Apple TV