Small sensors are getting better. I am shocked at how good the image quality is on my RX100 (with a "one inch" sensor; one inch refers to the size of vacuum tube that would contain such a sensor if it were 1960 or something, no dimension is anywhere near one inch). I'm not going to give up 4x5 for it, but it's way better than a phone.
That said, the camera bump is ugly. Why can't they use a telephoto design (your 500mm SLR lens isn't 500mm long, remember).
It's a look Nikon used to have ten or so years ago, and to me it suggests over-aggressive noise removal.
To be fair it's very good for a tiny camera, and amazing considering the state of the art ten years ago.
But I wonder if it's starting to fall into uncanny valley: the closer it gets to pro performance, the more obvious it becomes that it's not there yet.
They did mention that you'll be able to capture raws with the iPhone camera now, which will hopefully alleviate some of that.
They are, but they will also hit a physical wall at some point (if not already), and you'll continue trading "natural" dynamic range and low noise for software interpolated dynamic range and smoothing, which as others have noted, starts looking like Madame Tussaud's museum.
Then again, if Apple really wanted to impress me with their camera skills they would have to develop a medium format mirrorless digital camera for less than $5k. One can dream, I suppose.
