It can take pictures in full res, but actual resolution depends on ratio (38MPx for 16:9 iirc). The big thing here is full 1080HD video with 4x 'optical' (quality even better due to not limiting light input, but still digital technically) zoom, the real wow factor. The only sad thing is this revolution will cut out mid/low digicam producers, not smartphone competitors. Still people looking for digital cameras might turn to having one toy instead of two and buy it for the sake of awesome cam. iPhone 5 will have a hard time competing in that area, that's for sure. And 41MPx WP will be huge. Also improvement in quality for 5 and 8 MPx photos seems awesome.
Black PR from digicam producers explaining it's only MPx for PR sake commencing in 3, 2, 1...