I have a two year old 3gs iPhone that I am currently using. To be honest, it still works great and I could easily live with it for another year. However, I decided to update anyway.
While it would be nice to get the newly designed iPhone 5 next year. I decided I could live with the 4S for that extra (I have a 2 year contract) year easier than living with the 3GS for another year.
I am a photography enthusiast, so the new 8MP camera was the main reason I wanted to update. The ability to have a very good camera with me all the time without carrying anything extra was just too good to pass up. I also like the way it will push the photos up to iCloud, so you have a backup if something goes wrong. My only complaint is that there is currently no way to delete individual photos from iCloud, but I have to believe that will be added later.
One of the bonuses of digital vs film is that you have the ability to take several photos of one subject to ensure that you get a decent shot. The fact that iCloud (assuming you leave it on) now has several blurry or bad pics that you can't delete is a major headache. (you can delete all the photos on iCloud by resetting it, but that seems a bit drastic).
Secondly, Siri, the iPhone personal assistant, just looks really cool and useful. It will help set reminders, calendars, take text or email, and find answers to questions. I understand that is still has a few quirks since it is in beta, but I know I will get a lot of use out of it and I know Apple will continue to make it better.
Obviously, the 4S has a faster processor, a different design, and a much better screen that the 3GS, so this will be a huge upgrade from what I am using now.
As I mentioned on one of my Mac pages, I was going to jump ship from AT&T, but I decided to stay with them after I thought it over for a while. They offer faster data speeds and the ability to surf the web while you are using the phone. I decided to dump my "unlimited" plan since it isn't really unlimited. I went with the more expensive 4GB plan so that I could also get the "hotspot" feature. This will make it useful as a wifi backup when our cable device is down or when we are out of wifi range, but still in 3G range. Some of the places we vacation do not have wifi.
Despite some people thinking it is "girly", I went with the white iPhone 4S. I just wanted something different and I am confident of my masculinity :) I also got the 64GB version so I could load more music and photos on it.
Now I am just waiting for it to come. Apparently, it is on 1-2 week backorder.