The Rapid Repair dismantled 3G S, and detailed out the inner components. They discovered the same 600 MHz CPU powering the Palm Pre (that can actually run at 833 MHz).
The two phones, 3G S & Pre, share the same CPU and GPU, they run on different chipsets (iPhone: Samsung SoC S5PC100, Pre: TI OMAP 3430). However, this Samsung chipset is also capable of handling 720p video recording, streaming video conferencing and even Dolby 5.1 audio processing, giving this hardware some serious future potential.
CPU Power consumption
The CortexA8 processor can use up to 3x more power than the previous ARM 11 in the first two iPhones, yet battery life managed to improve with the 3G S. It is possible that the hardware might be using a process similar to Intel’s Quick Start technology, which saves power by quickly ramping the processor up to full power when in use, and then dropping it down to an idle state when not in use actually averages out saves more power than running it at more constant power levels.
Battery with More Juice
CPU enhancements explains the improved battery life. Also, the increased-capacity battery (1219 mAh, compared to the previous 1150 mAh), might also have something to do with it.
sources: rapidrepair, anandtecch, gizmodo