1. Software: Smarter Siri
Siri is great, but there is a lot of room for improvement. By integrating third party sources Wikipedia and Twitter, Siri will become an increasingly natural gateway to the social and crowdsourced information floating in ether. And Siri will get even smarter with M7 - the contextual chip.
2. Hardware: M7 - a small announcement with HUGE potential
The M7 is Apple's new "motion" chip. This dedicated chip determines the phone's physical context - it's orientation, geo-location and momentum of the device. This is where this otherwise as-expected product announcement gets cool.
I don't know that this chip is the be-all and end-all of motion sensing. But Apple's calling it out as core to a new offering allowing developers to deliver "Optimizations based on contextual awareness". And this is a big deal. The parallels between this claim and the Moto X's positioning as a contextually smarter platform (with a dedicated voice-recognition chip) are clear. Motorola uses their contextual system to deliver simply brilliant experiences - such as switching to a voice-heavy interface while you are driving. Apple seems to be leaving the contextual innovation to developers.
Motorola claims that their dedicated voice chip improves battery life.
Apple claims the same:
The new M7 coprocessor is designed to make iPhone 5s even more efficient. It offloads work from the A7 chip by collecting motion data from the accelerometer, gyroscope, and compass. Apps can then use this data without constantly engaging the A7 chip. Because M7 is engineered for this specific task, it uses significantly less power than A7 would require. So again, battery life is spared."
This is the future of contextual hardware.
I would be willing to bet that we will see a lot more secondary dedicated-solutions-oriented chips in the future. These dedicated low-power functions could become a partition on the SOC architecture or dedicated solutions delivered and horribly branded by the competition. But one way or the other, we're going to see a lot of it.
Siri was one of Apple's first steps into our Age of Context. The M7 is the next logical step: physical hardware design. I don't know that the iPhone 5S will bring a rush of wild contextual innovation. But it's great to see Apple recognizing the importance of the C word: context.