But that's not much of an answer. Why higher resolution? Because it will look better. Why 960x640 precisely? Because it's exactly 4 times the current resolution. But beyond that…
I guess I'm missing a more insightful conclusion like: "since Apple is putting iBooks on the iPhone, they want to make it a decent e-reader".
Because competing devices have higher density displays. And high density allows for prettier, crisper, more natural graphics. iBooks are just the icing on the cake.
Why 960x640 precisely?
Because it makes things simple. Whether you have a bitmap or some procedural drawing (vector if you will) you can easily translate it into coordinates on the new screen - just multiply by 2. No need to worry about sub-pixel drawing and artifacts occurring as result of rounding errors.
The thing is that I was kind of surprised by the length of the post compared to the relative lack of insight. Usually John Gruber brings interesting points and reflection to his posts, going in depth on a lot of his arguments; but with "Why 960x640" as a title, I was hoping to read something I didn't know or didn't think about. Here he mostly stated facts without, in my opinion, really answering the question "why does an iPhone need a higher resolution/pixel density?".