Apple announced a new model in its iPhone device series today that boasts the iPad 2’s A5 chip and dual-core graphics. The iPhone 4S means faster games with better graphics, a sequel to top-grossing iOS game Infinity Blade, and bad news for handheld console makers like Nintendo and Sony.

The current generation of handheld console includes Nintendo’s DS family (the most recent of which being the 3DS) and Sony’s PlayStation Portable family, with the upcoming PlayStation Vita being the newest. In the past two years, Apple has largely caught up to what the DS and PSP could do with games on a basic interaction level with support for synchronous multiplayer experiences and enhanced processing power that brought us game genres like first-person shooting and racing. The iPhone graphics trailed handheld consoles slightly, depending on which engine the developer chose to build their games, but today Apple says that the iPhone 4S will be able to graphics “that aren’t even available on home gaming consoles.”

The demo for this point was Infinity Blade 2 — a sequel to Chair Entertainment’s top-grossing iOS title. The original game leveraged the Unreal Engine 3 on iPhones for a graphically rich gameplay experience. When brought to iPad, the developer was able to introduce new textures to the game for an even better visual experience. Now, for the sequel, the developer is able to bring the same level of visual fidelity to iPhones — and increase the size of the game itself.

Geremy Mustard, technical director and co-founder of Chair Entertainment, told IGN today that “Everything you see within one of our environments, even in the distant background, is fully 3D and playable. It’s above and beyond what we were able to do before. You’ll see grass blowing in the wind, light rays, and god rays – these are effects that came partway through the console life cycle of Xbox 360 and we have them running on these mobile devices today and it runs beautifully.”

The increased graphics capabilities for games will probably be most prominent with Apple’s new AirPlay Mirroring feature for iOS devices. Not much information is available on this feature yet, but we gather that mobile devices will be able to use Apple TV-connected screens as external displays. This is a feature that the current generation of handheld consoles is capable of — but it’s largely under-utilized because the DS console’s dual screens make for an unnatural single-screen viewing experience and the PSP is largely neglected in the U.S. market. We’ve also learned that Infinity Blade 2 will make use of iCloud so that players can transfer game saves between iOS devices — another feature cribbed and improved from handheld consoles.

The only edge handheld consoles have on Apple now, it seems, is pushing the graphics envelope even further and offering game experiences that leverage each console’s unique features. Already, Nintendo’s 3DS console offers 3D in addition to its two-screen display, and the upcoming PlayStation Vita has two analog sticks, a rear touch pad and a motion-sensing control. Even with console-specific games to hopefully drive sales, however, Apple’s iOS devices are putting pressure on handheld console makers. Nintendo appeared to cave to this, recently announcing a Pokemon game for iOS and Android.

Apple’s iPhone 4S will be available October 14. Infinity Blade 2 launches December 1.

Sources: IGN, 1UP, MacLife