Remember how the iPhone 4 is almost Flickr's most popular camera? Apple did, and it's given some serious TLC to the iPhone's capabilities in this area, too.
The most-welcome change is with the phone locked, double-tapping the Home button will now immediately launch the Camera app for those quick fire moments you simply have to capture. Second most-welcome change is with the Camera app loaded, a quick press of the "volume up" button will take the pic -- no more almost dropping the phone when trying to shoot a picture one-handed on the touch screen. (A controversial move. When third-party app Camera+ added the feature, as I wrote in my first ever piece for TUAW, it was booted from the App Store shortly afterward.)
Photos has seen some modifications, too. It'll gain a one-touch enhance button, red-eye removal, a cropping tool and some other post-processing features. iOS 5 also brings more iCloud goodness to photography in the form of automatic syncing of your Camera Roll across iOS devices and your Mac. Shoot a pic on your iPhone, and it'll appear on your iPad -- so that you can show it off on the big screen -- and upload into a special area in your iPhotos on your Mac, too. And again, there are no cables in sight.
Ever received an SMS message whilst talking on your iPhone then discovered you couldn't hang up until you got rid of the message pop-up? As our iPhones have become central to our digital lives, it's become increasingly obvious that the take-it-or-leave-it approach to notifications just isn't up to the job. Apple completely rebuilt the entire system in iOS 5. Notifications now appear in an ordered list in a special screen, which you can access at any time by swiping down from the top bar (yes, very similarly to how Android does things). They also appear on your phone's lock screen, and (in a clever move) if you perform the unlock swipe on any given notification, the iPhone both unlocks and immediately launches the corresponding app so that you can deal with whatever it was trying to tell you.
Twitter is embedded quite deeply into iOS 5, and if you're even a small-time user of the service, you should appreciate some of the new features. You'll be able to enter your Twitter username and password just once into the phone's settings, and all Twitter apps you install will be able to work with it. The Photos and Camera app will allow you to post images and video to your Twitter stream and YouTube, and Safari will post a link to the page or video you are currently viewing. Even the Contacts app will integrate by allowing you to copy someone's avatar pic from their Twitter account to your contact entry for them.
iMessage is the Messages app crossed with an instant messaging client crossed with a group messaging app. It can send text, photos, videos, contacts and so on between any pair of iOS devices, all for free. It also uses iCloud to sync its state between devices, so I can start talking to you on my iPhone, then pick up my iPad and resume the conversation exactly where I left off.
The big question mark is what happens if the person you're sending to doesn't have an iPhone -- particularly as Apple suggest iMessage replaces the old Messages app. It sounds as though it must detect that case and fall back to plain old SMS/MMS, but we don't yet know for sure.
Apple didn't say too much about this, but it's adding a new to-do-style app called Reminder. In addition to the usual sort of checklist design we've seen in lots of App Store apps, and more cloud synchronization across all your Apple kit, it mentioned one unique and very handy-sounding feature: Reminder notes will be location aware. For example, you could set a note to remind yourself of something when you next go work, and the iPhone's location tracking will sense when you reach the location and trigger the reminder then.
Apple talked about plenty of smaller new features in iOS 5 today, too -- NewsStand, Safari Reader, a tabbed browser for the iPad, some tweaks to Game Center and more. I've only covered the game-changing features here, though -- the ones that really solve significant existing problems under iOS 4 or bring significant new features to the table. If I've whetted your appetite for more details, then we've got plenty more coverage on TUAW of Apple's other announcements for you!