The last issue of The Economist has a good article about the phone of the future. Some quotes of this compelling overview:
The chances are that phones will not only look very different—they may not even be seen.(…) And even if they are still called “phones”—a word derived from the Greek word for voice—making voice calls may no longer be their primary function.
(…) “The cellphone is not a telephone. It is a—I don’t know what it is. A communications device? A tool I carry in my pocket?” says Don Norman
(…)
One thing that is clear is that phones will pack a lot more computing power in future, and will be able to do more and more of the things that PCs are used for today—and more besides. (…) In a decade’s time a typical phone will have enough storage capacity to be able to video its user’s entire life, says Mr Lindoff. Tom MacTavish, a researcher at Motorola Labs, predicts that such “life recorders” will be used for everything from security to settling accident claims with insurance firms.
(…)
Researchers at Nokia, meanwhile, speculate that within a decade, the cost of storage will have fallen so far that it might be possible to store every piece of music ever recorded in a single chip that could be included in each phone.
(…)
No doubt other new functions will be incorporated into phones. But which ones? (…) they might subsume the other two items that are generally carried everywhere, namely wallets and keys.
(…)
handset-makers now make different devices optimised for particular tasks such as music, photography or e-mail, and combinations thereof. The next step, suggests Stephen Randall of LocaModa, a wireless-services firm, will be a great decoupling, as the screen, keypad and earpiece start to become separate components, or are replaced by other completely new technologies.
(…)
Some users might choose to hook up separate screens and keyboards when needed, such as when answering e-mail or browsing the web. Already, early examples of such technologies exist. And there are even more elaborate alternatives. Tiny projectors inside handsets could allow walls, tabletops or screens made of flexible materials to be used as displays while on the move (…) This approach also makes it possible to overlay information on the real world, which could be useful when giving directions. Your phone might even label people at a party or conference to remind you of their names.
(…)
“virtual keyboard” onto a flat surface….Voice-recognition systems ….use of brainwaves to interface.

The ability to superimpose images and sound upon reality means that future phones will “create layers on our world”, says Pierre de Vries of the Annenberg Centre for Communication at the University of Southern California. Users will always be connected, he says, but in concentric circles of conversations and interactions that range from people right next to them to those far away.

“When I try to make predictions, I don’t look at what I see in the technical realm, I look at what I see in the social realm,” says Mr Norman. He has recently been investigating how children interact with each other and with technology. “They are never alone with their own thoughts,” he says. Instead, they listen to music while texting and talking with friends next to them. “We are learning that we never have to be away from people,” says Mr Norman.