With the new iPads having a retina display, what will happen to iPhone apps that are built to support retina display for iPhone/iPod touch on an iPad sized retina screen. Will the iPad use the retina version of the iphone app or stick with the normal version?
The German magazine c't (or rather the new "Mac & i") tested the new iPad (3rd gen.) and found that it finally uses retina graphics in the iPhone apps that provide them:
Übrigens stellt das iPad 3 auch Apps, die für das Retina-Display des iPhone 4(S) optimiert wurden, schärfer und ansprechender dar als sein Vorgänger – iOS zieht nun also endlich die optimierten Grafiken heran. Das wirkt sich positiv auf beide Darstellungsvarianten aus, auf die Originalgröße und den "2x"-Modus.
By the way, apps that are optimized for the retina display of the iPhone 4 (S) are displayed by the new iPad sharper and more appealing than by its predecessor - iOS now finally uses the optimized graphics. This has a positive effect on both display variants the original size and the "2x" mode.
When you run the iPad 5.1 simulator in retina-mode, it seems that iPhone apps are using retina graphics at 1x. As the new iPad screen is 1536x2048 (portrait) and a retina iPhone app is 640x960, it's still the same physical size as a non-retina iPhone app in a non-retina iPad.
So my guess is that yes, the new iPad will use retina-graphics in iPhone apps, but they will look the same size at 1x as non-retina iPhone apps in a non-retina iPad, and 2x will only double the graphics.
Keep in mind that the iPad simulator is just - as the name implies - a simulator. Although it's usually a good indication, there's no guarantee that the hardware will behave in the same way.
Using apps which supported the retina display on iPhone 4 on an iPad always resulted in them rendering the non-retina scale graphics. A tweak is available for jailbroken devices to select the retina graphic assets instead so it is feasibly possible, Apple just don't do it as standard.
I suspect that the iPhone compatibility was a crutch to help people over the initial period while there weren't many iPad apps and cannot see Apple implementing it any time soon.