There were rumors Apple might move to a 3.75 or even 4-inch screen for the 2011 iPhone, but instead iPhone 4S was introduced with the same 3.5-inch screen size Apple has used since 2007. Dustin Curtis thinks it all boils down to what it usually does for Apple -- usability.
Touching the upper right corner of the screen on the Galaxy S II using one hand, with its 4.27-inch screen, while you’re walking down the street looking at Google Maps, is extremely difficult and frustrating. I pulled out my iPhone 4 to do a quick test, and it turns out that when you hold the iPhone in your left hand and articulate your thumb, you can reach almost exactly to the other side of the screen. This means it’s easy to touch any area of the screen while holding the phone in one hand, with your thumb. It is almost impossible to do this on the Galaxy S II.
Basically, Apple treats iPad as a two-handed device, iPhone as a one- or two-handed device.