It just means that the 16 GB iPhone 4S is worth $100 more to people than the 8 GB iPhone. Since I assume most people buying one are coming from the 3GS after their 2 year contract is up. The 4S is certainly not going to get iPhone 4 users to upgrade early for an extra couple hundred bucks.
I’m not really sure whether that’s Apple’s goal in the first place. Realistically the vast majority of people is not going to buy a new phone every year. Apple is not selling the iPhone to a handful crazy devotees, those are (at least by now) clearly a tiny minority. Consequently it doesn’t seem wise to optimize everything for one-year upgrade cycles.
