The main difference physically that latest iPhone 3GS has 3 Megapixel camera, that equipped with Autofocus features and Video Recording, while iPhone 3G regular only has 2 Megapixels. Internal memory is also increased where the 'iPhone 3GS' emerged with 16/32GB choice.
Another feature differences between the iPhone 3GS with iPhone 3G regular are:
1. iPhone 3GS (S here stands for Speed), which means the iPhone 3GS is equipped with a faster processor, so the application process or even access the menu faster than with regular 3G iPhone.
2. S on iPhone 3GS could also mean that the 'iPhone 3GS' has a fast 7.2 Mbps 3G connection
3. Batteries iPhone 3GS has a battery that is 50% more durable than regular 3G iPhone
4. iPhone 3GS has been equipped with Voice Control and Voice Command
5. Digital Compass. IPhone 3GS has also been equipped with a Magnetometer, which will work well with Compass and Google Maps.
6. For other features of the iPhone 3GS like features copy, paste, or cut, can also be found in the iPhone 3G usual. But, if you do a firmware upgrade iPhone 3G always using the latest iPhone 3.0 software provided by Apple.