One of the single biggest issues with smartphone cameras is that they do not have optical zoom. Oh sure, you can get stick-on gimmick optical zoom attachments for some cameras, and there have been one or two experimental attempts at putting optical zoom in a smartphone—such as the K-Zoom Samsung (shown below)—but these have all failed in the market.
Smartphone users want optical zoom but they don't want big phones. This means the zoom has to be done some other way to keep the phone small and light.
The following image shows one way it might be done with the front lens shown at the left. The light comes in through the main lens then hits a prism and goes through the zoom lens group, then through a distortion correction lens, then finally another prism up onto the sensor.
HTC and LG have promised to release useful optical zoom cameras in future smartphones, and you can bet if they are trying to do it then so are Samsung and Apple, but they haven't managed it yet.
The problem is that digital 'zoom', which is not really zoom at all, exaggerates the crappy-ness of smartphone pictures because it lessens the pixel density. One way that smartphone cameras make the pictures they take look okay is by having a massively high pixel density on a small screen. It's only when you print a smartphone picture at A4 size or crop into a section of the picture that you realise the starting point picture was not as good as you thought—because it looks fine when viewed on the smartphone with a 5" screen at a pixel density of 300+ dpi.
Following is a non-zoomed picture of a horse at a gate. In this shot the horse's head looks pretty sharp and in focus, and there is no noticeable digital noise.
Next is a digital zoom in on the horse's head. Now it can be seen the shot is not in sharp focus and there is obvious digital noise even though this picture was taken in bright sunlight.
If you were to print this at 6x4 (a.k.a. postcard size) then it would probably work out more or less okay. But if you printed it at A4 then the digital noise and slight fuzziness is going to be obvious.
How do you avoid this? You need optical zoom so you can take a zoomed 'full sensor sized' original. It might still be a little blurry—depending on the quality of the lens and how good the anti-shake is—but the colour depth will be better and there will be less digital noise.
With the in-phone camera being one of the Top 3 considerations when buying a smartphone it won't be long before some manufacturer puts a useful optical zoom in.