With the new iPhone SDK, it's just a matter of time before we see a wave of new applications. We expect a lot of popular web 2.0 apps to offer an iPhone version. Native Twitter, Facebook and Flickr clients for iPhone will run faster than their in-browser versions and will take advantage of the impressive Apple UI libraries. But there is an entirely new breed of applications also coming to iPhone. These apps simply would not be possible without a device like iPhone.

The major theme of this new wave of apps will be blending of the physical and digital worlds, using iPhone as the bridge. In this post we take a look at what's coming.

1. Reality Tagging

Tagging reality is not new, but will be much better done with iPhone. Here's how it will work. You take a picture of a landmark, then comment and add tags. The phone will automatically geo-tag it and send the picture to a photo sharing service on the Web. Now anyone in the world can find your picture by exact geo location, or by its tags. Reality tagging will be like a distributed Google Earth, but for pictures.

2. People Tagging

Even better than tagging landmarks, you will be able to use iPhone to tag people. You can already take a picture and assign it to a contact. It is just a matter of time before these pictures will available to a search engine. Doing it on the phone will be quick and fun. In a couple of years the problem that we described in this post will go away.

3. Reality Recognition

Reality recognition will be fueled by reality tagging and advanced image recognition. Imagine going on a hike and coming across a tree that you have not seen before. You will point iPhone at the tree and instantly a Wikipedia page about it will load. Or imagine that it's your first time in New York City. You point an iPhone at the Chrysler building (because you think that it is the Empire State Building) and again information about the landmark will be paged to your iPhone.

4. Physical Social Networks

Today's social networks exist on the internet, but mobile technology is going to bring it to the physical world. You will be able to walk into a restaurant, open up your iPhone and see a list of your friends who have been to the place. You can flip through their comments and ratings, share comments on the menu - all from the palm of your hand. Similarly, standing next to a painting in the Louvre, you will be able to instantly find out what your friends thought of it. Looking at this broadly, as we discussed in this post, advances in mobile computing enable us to overlay the digital on top of our physical world.

5. Personalized Travel Guides

Travel is one of the most fun things we do in life and one of the most innovative businesses. People love tours and tour guides who tell them about the landmarks and history of new places. Now imagine having personalized tours of any location of the world available. With the touch of a button, information about your current location will appear in your hand. Even better, the tours will be custom tailored to you, since software will know your tastes and travel preferences.

6. Digital and Physical Treasure Hunt

Travel is fun, but not as much fun as games. With the latest spike in social games, we are sure to see interesting activity in mobile games as well. And with the iPhone, we will be able to play games that take place in both the physical and digital worlds. The clues will be scattered over the Internet and cities such as NYC. With your iPhone you can navigate your way through this fun physical and mental challenge, showing off your knowledge of the web and NYC.

7. Distributed Mobile Games

Casual gaming is especially on the rise these days, fueled by social networks. Applying this model to mobile devices is particularly interesting since it enables people to tap into, not web-based, but fully-fledged 3D games - anywhere. The possibilities range from setting the mood of a game based on the surroundings, to connecting players based on geo location. And even without tying the games to the physical world, the fact that people can tap into the network at any time is game changing (pardon the pun).

8. Credit Card and Biometrics as Software

The business world is also going to benefit from mobile innovation. Soon credit cards will become software. You will walk into a store and to pay, you simply choose a credit card button. The iPhone will communicate securely with the cash register in the store, via Blue Tooth or Wi-Fi. The safety of the transaction will be ensured via biometrics. For example, a clerk in the store might ask you to place a randomly selected finger onto the screen of your iPhone to verify that the phone belongs to you (assuming that all phones are securely initiated in the store and may not be reset).

9. Paperless Receipts & Digital Business Cards

We wrote here last week about the coming demise of paper as a transport medium. Among the things we discussed was the end of receipts. Even today some companies are switching to email receipts, but devices like iPhone now make it possible to manage all receipts in a digital format. You will get a receipt of your purchase on your screen via Bluetooth or Wifi. It will also be emailed to you and backed up to remote store. The advantage to having it on the phone is that if you want to return it, you can simply bring it up and beam it back to the clerk's computer.

Another piece of paper that is coming to an end is the business card. More and more people connect via LinkedIn these days, but they still exchange business cards when they meet. Palm did a good job early on of solving this problem - the business card could be beamed between the two devices. iPhone is likely to bring the digital business card exchange back in fashion and even make it big. This generation of software will automatically add the cards to contacts and connect the two of you on LinkedIn.

10. Medical records as Software

The medical industry uses the most advanced software when it comes to diagnostics, but also uses the most outdated ones when it comes to record keeping. Having your medical history available on the mobile phone will be a great way to enable all of your doctors and pharmacies to better communicate around your health. Because medical records are still mostly in paper, often doctors are not aware of all the treatments and drugs that a patient is taking. Having a simple, portable way to move your medical history around would make things much simpler.

11. Physical Browsing & Digital Shopping

The last two applications have to do with shopping. The first one is browsing things in the physical world and instantly buying them online. The experience of browsing books on Barnes and Nobles is different; and for most of us is superior than browsing on Amazon. But prices are better online, so we typically end up taking notes and then buying online. With iPhone it will be possible to take a picture of a book in the store and have it immediately appear in your Amazon shopping cart. The same can apply to many things, including clothing, houseware, etc.

12. Location/time-based deals

If you were be open to it, stores would love to compete for your business. If you are about to buy a camera at BestBuy and there is a Circuit City near by, they would be willing to win your business by bidding a lower price. Imagine pointing the phone to a camera and getting instant bids from neighborhood stores. Sure you can do this now online, but a lot of people still buy the old fashioned way - by first holding the thing in their hands.

Conclusion

The applications that we have discussed are very exciting and will change the way we do things. If you look carefully at each of the 12 apps above, you can see bigger trends among them. The first group is applications that mesh together the physical and digital worlds. The main benefit is that it enhances the physical experience by overlaying digital smarts.

The second group is games - always part of our culture and games evolve, adapt and re-invent themselves with new technologies.

Then comes the group of applications that aims to improve things we carry around. Credit and business cards, receipts and even medical records are on track to become software.

The last group of applications is focused on innovation in shopping. Interesting opportunities will arise from combining the best of both physical and digital shopping experiences.

And now please think about the applications that you would love to see on your iPhone and share your ideas with us.

Note: Special thanks to Fraser Kelton and Andy Roth for discussion and application ideas.