BoyGeniusReport has posted screenshots purporting to be a debugging menu from the latest beta of iPhone OS 3.0. The image depicts a menu that would control a digital compass (magnetometer) which is rumoured to be in the new iPhone.
Mac Rumors offers further background on the digital compass, first adding credence to rumours and secondly offering further information on what a digital compass is.
Examples of how this could be used include pointing your iPhone's camera at a building and the phone telling you what building it is by combining GPS, accelerometer and compass information. The iPhone could even overlay graphics and text on top of the image to provide additional information. Another application described is the ability to show information about stars and constellations simply by pointing your iPhone towards the sky.