Is there any room for improvement there given the space there is for optics on a phone, and the desire that the lens not move? I'm wondering if we've basically already hit the wall with phone photography quality.
Of course there is room for improvement - even if you assume that the current lenses have no room for improvement (but they do), there are still improvements to look forward to in noise levels and dynamic range for sensor+electronics, as well as (huge) improvements in image processing.
As far as optics go, while size is certainly a constraint, particularly if you are thinking of zoom lenses, the cost constraints are brutal. On the bright side there are already cell phones that have a pronounced photo profile where the modules are allowed to cost a bit more, Nokia in particular comes to mind, but S-E and Samsung have some offerings as well. Lens materials, coatings, design complexity are factors that come into play both in terms of performance and cost, as well as focusing speed and accuracy et cetera. Add completely new technologies that may or may not come into play and the future looks fairly bright for camera phones - at least if you're the patient type.
But aaronspink raises a valid point, for sure - just about all aspects of photographic quality other than resolution typically get roughly as much attention and budget as their exposure in marketing justify....
IMHO consumer awareness, as usual, is key.
PS. wishiknew - you are correct. Pixel size (at the sensor level) is constant, and the number of pixels increased. I suspect which sensor we are dealing with but don't have enough information to say for sure - as I said, Sony Components offer pdfs for their offerings.