It's both, actually. But that said, Nokia uses very good glass.
It's only once you get up to P&Ss and DSLRs that the glass can really hold back the sensors -- phone sensors are always struggling to make a compromise between package size and image quality, and usually package size wins.
>> The problem with phone cameras (mostly) ins't the sensor, it's the glass, or lack there-of.
Is that a problem with the camera or the user's expectations of what that camera can do?
You can only push the laws of physics (with respect to optics, especially) so far, and if you want a camera that can fit in the pocket of a pair of skinny jeans, compromises must be made.
There's still a lot of room to push the laws of physics, although I'm not sure glass is the answer. I think manufacturing tolerances will be the biggest limit for inexpensive handsets.
If I play (hah!) stupid, I look at the flange distance and lens size for an SLR of any sort and compare it to a mirrorless camera such as the M9 or even NEX-7, I can get much higher quality on the same or smaller sensor with smaller lenses, especially in the normal field of view. This is purely based on that big empty space in the SLR. The main thing we'll have to give up is an expectation of a shallow depth of field, but "f/8 and be there" is why camera phones are useful anyway.
I've been impressed with the sapphire lens on the iPhone 5, all things considered. It's not what I would call a good camera, but perhaps coupled with a high-density sensor with an alternative pixel structure[1] and microlenses, it would not be unreasonable to expect 2013 "full frame" image quality in a mobile device in 2-5 years.
I don't want to burn my fingers trying to capture 4k raw video on my phone. Heat dissipation will become an issue, as it is on HDSLRs and MILCs.
>> My point is this is the _worst_ kind of spec padding.
How so? This is actually the first officially announced smartphone (I also have a keen interest in the upcoming Sony i1, but it's not a reality yet) that I'd consider buying just for the camera.
Personally, I think Nokia has taken an interesting approach with the sensor, because the added resolution gives them leeway in overcoming the optics problem (from a focal length perspective, at least) in that the "digital zoom" will produce better results than any other phone.
The upcoming Sony i1 should please many people. It's rumored to have a 1/2.3" sensor - while smaller than the Nokia's sensor, it's still quite large for a phone.
