The iPhone 4 has a very high-resolution screen (for a smartphone) packed into a small space. The intense pixel density of 326 ppi means that the dots are so small that they're almost imperceptible. Apple markets this as Retina Display, and it's a key differentiation point when comparing iPhone hardware against other handsets.
Some figured that Apple would be bringing a Retina Display to the iPad 2, but that didn't happen and the current iPad still has the same 1024x768 resolution as the original model.
New hints have been discovered in the iOS 5 developer beta software that strongly suggests that Apple is prepping for something that has four times the resolution of the current iPad.
Graphics for the Apple's Newstand application on the iPad come in both the current 1024x768 resolution as well as 1536x2048. Artwork for the new Twitter framework also reference the new resolution. See screenshots of it at Techunwrapped.
Reuters this week also cited sources saying that the next iPad will have a new screen with five to six times the resolution.
These graphics could be just a test for Apple, but it wouldn't be a far leap to assume that iPad 3 will be launched with a high-resolution screen sometime during iOS 5's shelf life.