Brian X. Chen of NYT:
What Apple is acknowledging is a power management technique in which the iPhone scales back processing power to keep the device running for longer when its battery health is low. Lithium ion batteries have a limited number of charge “cycles” before they can no longer be recharged properly. Apple’s website says the battery loses about 20 percent of its original capacity after 500 charge cycles.
In other words, if your iPhone is beginning to run out of battery capacity, these slowdowns might kick in to keep it running for longer or prevent it from shutting down unexpectedly.
This isn't a ploy to get old iPhone customers to upgrade. On the contrary, this is an engineering decision made to keep your old iPhones running longer.
Engineering-wise, I think Apple made the right decision. But user experience-wise, I definitely think Apple needs to better communicate these limitations of lithium ion technology, especially when an iPhone customer's battery has degraded past a certain threshold.
Every iPhone customer should know the cheapest solution is to replace the battery through Apple for $79.