Apple recently unveiled the third generation of its popular mobile phone, the iPhone 3GS, and we've managed to get our hands on one for a quick once over.

At first glance it's almost impossible to tell the 3G and the 3GS apart, but under the hood Apple has made a number of improvements, including more storage, a higher resolution camera, faster processor, better data speeds, stereo Bluetooth and a magnetometer to enable the compass feature. Despite the extra grunt behind the 3GS, Apple reckons it has managed to improve the battery life as well.

Apparently the 3GS also boasts a smudge resistant screen, but to be honest we couldn't notice much difference and after a few minutes of use you'll find yourself wiping down the screen with your sleeve or a cloth, just like every other touch-screen around.

The latest version of the operating system also brings in a raft of new features, many of which will be available to original and iPhone 3G owners as well, including such novel concepts as search, voice recording, video recording, MMS and the ability to cut and paste text.

Of course some people will argue that Apple is not doing anything new, but instead just catching up with what most of today's smartphones can already accomplish, but regardless these new features do make it an even greater threat in the enterprise market as the iPhone now has enough functionality to make it a workable business device.

Possibly two of the biggest changes in this regard are ability to use the landscape keyboard in any application - something that was sorely lacking in previous iterations – and the introduction of cut and paste. When you have two hands available to type, the landscape layout is almost always much easier, however we found the lengthy procedure required to select, cut or copy, and then paste text to be somewhat laborious. That said, we can't really think of a bett er way that Apple could have done it under the circumstances.

Apple has done an excellent job of integrating MMS support, making the multimedia aspect fit in nicely with the threaded message system it uses for SMS. Adding images is also as simple as tapping the little camera icon that appears when typing a message and then either taking a shot or browsing for an existing one to be embedded into the message.

Another noticeable improvement is the increased data speeds which now support HSPA up to 7.2Mbit/s and if you're in the right areas you can really notice the difference. Similarly the faster processor helps make the iPhone's already slick interface just that bit smoother, particularly in resource heavy applications like Google Earth.

In terms of the camera, the bump in resolution to 3 megapixels and the addition of video recording goes a long way to turning it into something usable, however the lack of any kind of flash or zoom function means it still lags behind most competitors.

The new search function is a great addition, particularly for those heavy users who store a large number of contacts, email and bookmarks, allowing you to search for a term across the entire device in one place.

Apple has also jumped into the voice arena with the launch of the 3GS, introducing a pretty handy voice recorder and voice control as well. The voice recorder works well and also allows you to send recordings off in an MMS or an email.

Voice control is done pretty neatly as well, activated by simply holding down the home button for a few seconds. As long as there isn't too much background noise, the speech recognition is pretty accurate, although it does take a while to learn the commands, and the lack of any ability to train the software is something of a shortfall.

Apple has also introduced tethering, which allows owners to use their iPhone as a 3G modem for their PCs. However, at least here in the UK this feature has been crippled by the mobile operator with the introduction of an extra tethering charge. According to O2, despite the iPhone's unlimited data service on the phone itself, if you wish to tether your iPhone you have to purchase a bolt-on for an additional £15 a month, which gives users up to 3GB of data. In this case, most people would be better off simply buying a separate 3G dongle.

At first glance the addition of the Compass may not seem like anything you might actually use, and as a discrete application that may be true. However its potential to be integrated into other applications is quite wide, the most obvious being maps and navigation – for instance if you double tap the 'locate me' icon in Google Maps the location icon also indicates your direction, helping make finding your way around just that bit easier. It also helps enable full GPS navigation systems to be ported to the iPhone.

So, the iPhone 3GS is faster and packed with a raft of useful new features, but is it worth upgrading? In the UK, O2 has an exclusive deal with Apple for the iPhone and the operator has attached a hefty price tag to the 3GS and isn't offering a free upgrade like it did last time.

Given that many of these new features are available on the previous iPhone through the OS 3.0 upgrade, if you're only a few months into your contract it's probably not worth the upgrade. But if you're a fan of the iPhone and your contract is up for renewal it may be worth counting up your pennies.

However for those that think the new iPhone is too expensive, the recently launched Nokia N97 and the upcoming HTC Hero could be great alternatives and may well suit your pocket a lot better.