Owners of the iPhone will notice no difference in performance or data transfer speeds; the device will not magically connect to AT&T's shiny new 4G LTE network. It will simply receive a deceptive labeling change that allows AT&T to market the iPhone as a 4G device against competitive phones from Verizon — including, perhaps most importantly, Verizon's own 3G iPhone 4S. It is a triumph of marketing for AT&T, and a rare acquiescence to a poor and confusing user experience for Apple.
Although this change appears, as Nilay writes, to have occurred at the "impetus" of AT&T, it remains odd that Apple has complacently allowed for such a deceptive portion of the user experience. Regarding this topic, Shawn Blanc posed an interesting thought this morning on Twitter:
I wonder if the iPhone showing AT&T "4G" on 5.1 is a part of the negotiations to keep the new iPad's LTE data plans low.— Shawn Blanc (@shawnblanc) March 8, 2012
While this certainly seems viable, I would imagine that AT&T's pricing may be primarily responsive to Verizon's pricing. In any discussions, Verizon would have lacked any semblance of leverage over LTE plan pricing. Thus, I would imagine Apple dealt with Verizon first in order to set competitive prices prior to their discussions with AT&T.
In a darker sense, it's worth noting that Apple probably takes little issue with selling its device with a "4G" label. In a consumer environment characterized by the misinformed clamoring for highly marketed 4G connections, AT&T's fairly description of its service actually serves to give Apple a benefit in the average AT&T showroom.
Having said that, realistically, I doubt we will be blessed with a true answer to this evident inaccuracy and marketing ploy. However, what we do unquestionably know is that the "4G" label is now a permanent fixture for iOS and, as I wrote earlier today, I imagine it will become unilaterally present (and accurate) with the forthcoming iPhone.