Check out this video for ‘Layars’, an augmented reality application.  This application isn’t available for the iPhone 3GS yet but expect something similar (or a port of this) within months. An ‘augmented reality’ application, in simplistic terms, takes what you view on your phone camera and overlays information as you pan about. Whilst much of the information is determined using your current GPS co-ordinates, without a digital compass the panning would be hard (arguably impossible) to pull off.

Anyway, it’s easier to watch the video than read my explanation. Whilst some scoffed at Apple’s inclusion of a digital compass in the iPhone 3GS, this preview alone pretty much convinces me it was a smart move…