A post late last week on the website BGR, which cited a Chinese website, reported that Apple will be coming out with 4.7- and 5.7-inch iPhones this year — significantly larger than the 4-inch display of the iPhone 5 family. The source for the information is said to be Foxconn executives. While it's impossible to know what Apple will do, the repeated rumors of a larger iPhone clearly suggest that Apple is testing larger prototypes. Typically when we get incessant rumors such as this, there tends to be some credence to them. The post on BGR gives an overview of previous iterations of this rumor, which has been reported by respected media such as The Wall Street Journal and Bloomberg. A 5.7-inch display would put the iPhone in the same league as Samsung's Galaxy Note 3, which also has a 5.7-inch display. Phones of this size are often referred to as "phablets," an elision of "phone" and "tablet."
Originally Apple had insisted that the iPhone be small enough that you could comfortably hold it in one hand. And when the iPhone went from 3.5 inches to 4, Apple made it taller but didn't increase the width. So larger iPhones would go against the grain of their earlier conception of what a smartphone should be. On the other hand, it's clear that the market is trending toward larger-screen options, so Apple may want to capture some of this market. Still, one reason Apple has been so successful in making money is that they've kept their product line very focused, with typically only a few options. Having multiple sizes of iPhones is also a departure from the past.
However, Apple is known for developing prototypes that never launch, so just the fact that they're testing various sizes doesn't necessarily mean that they'll bring these to market. My hunch, though, is that we'll see a larger iPhone.
The report also says that the new phones will have the Touch ID feature found on the iPhone 5s.