There is a finite size in which to squeeze in your megapixels. I've seen 12mp phones advertised, although these haven't exactly been what I would call "slim". But for a more direct comparison a lot of the competition seem to be hovering around the 6mp area.
There is an interesting argument to be had about the quantity v quality debate when it comes to increasing the amount of pixels you cram into your lens. Without moving to larger form factors than a slim phone, the rule of thumb is that clearly having too few pixels gives a poorer picture. But this doesn't tell the whole story. Cram in too many, and you start to have to reduce the size of them, leading to each pixel letting in less light, and as such producing poorer results. Bigger filesize, larger image, poorer quality overall.
Now obviously there is a happy medium inbetween, one that balances everything from the size requirements, the speed at which the captured picture can be written to flash (again, more pixels = slower), even the amount of JPEG compression used to keep both the kilobytes down and the time taken to write it.
I reckon that having a lesser resolution high quality lens/CMOS etc, that doesn't need to compress the image when it saves it, is going to produce a similar overall "quality" of image to a camera with more lower quality pixels and associated compression...ESPECIALLY when you consider what the intended usage of the photo will be - and let's face it most pictures taken on digital devices are only ever viewed on other digital devices. I really can't see the point in having massive photos that will have one of three things happen to it:
1) It stays in a folder, and you view it downscaled to fit a maximised monitor on your PC/Mac. Let's be generous and say you have a full HD 1900x1080 display. That'll be 2.1 megapixels then...
2) You stick it on Flickr/Facebook - after downscaling it to 800x600
3) You print it. Chances are you will print it at 6x4 inches, at which 2mp is sufficient.
Don't be fooled by the megapixel scam - it's like the Mhz wars of years ago. More is not ALWAYS better, unless you are using a full size form factor. In smaller portable packages more can be less.
I'm sure Apple did plenty of actuall testing and analysis and tried numerous lens/CMOS combinations, before settling on the one that produced the best overall package for the camera given it's brief. Clearly there is no technical engineering reason why they couldn't wang a 10mp monster in there, but what does it gain them? Just bragging rights, and if they wanted to compete on the more is better front, they wouldn't do that and then leave out other features like MMS etc. They aren't competing on spec sheets, like many other manufacturers, they are competing on the overall experience.
I'm happy with the camera for what I use it for, I'm sure the next hardware revision will have a higher megapixel camera in it, but it will also I'm sure be done for quality reasons, not marketing. I also bet it will still be less than 5mp. Personally, I'd rather see them throw in autofocus...