If Apple adopts a bigger 4-inch screen for the iPhone 5 as rumours indicated earlier this week, it is very likely that it will be a HD-ready one in order for Apple to keep its Retina Display claims.
Currently, Apple's definition of a retina display is one which can reach 326 pixels per inch. Assuming that Apple wants to keep the same screen ratio of 3:2, this would mean that the next iPhone 5 would have a 1080x720 pixels resolution in order to qualify as a "retina display" with a 325 ppi, which would make it technically HD ready since it has 720 lines vertical lines (Ed: although not in widescreen ratio).
Why would Apple try to get a HD screen on the iPhone 5? A couple of reasons. First, the competition, lead by Android 2.3, supports HD-ready screen resolution already and two, bigger four-inch plus screens have appeared on the market with HD ready resolutions (e.g this Hitachi screen).
The corollary of a bigger screen is that the home button will have to go away; Apple won't resize it (it didn't for the iPad either) and rumours about the death of the home button appeared last month, stemming from the introduction of multitouch gestures in the iOS 4.3 beta operating system.