SAN FRANCISCO (Reuters) - The first iPhones won praise for their sleek design and elegant touchscreen, but Apple's new computer phones, arriving this week, will use the power of software to make the device like no phone ever seen.

Whether it's faster Web speeds, security for business users or using the phone's direction-finding capability to let it act as a game controller or location-aware device, it's software, not hardware, that should define the iPhone from here out.

"The emphasis on software shifts the debate from how cool a device it is to what it can do for you," says Tim Bajarin, an analyst with industry research firm Creative Strategies of San Jose, California, and a veteran Apple-watcher.

"It's basically redefining what a phone is," said Raven Zachary, open source software analyst for industry research firm The 451 Group and founder of iPhone Dev Camp, a conference for independent developers of software for iPhones.

Get over how it looks. It's the power of the computer inside, combined with supporting technologies that let it perform many powerful tasks no phone has managed before.

IS THAT A COMPUTER IN YOUR POCKET?

IPhone gaming features are a good example. A built-in accelerometer lets the device know when it's being tilted or swung, allowing it to act like a Nintendo Wii game controller, not just an input device where the user punches buttons in four directions to control game movements.

Similarly, the iPhone's Global Positioning System (GPS) chip allows software to go far beyond obvious functions like maps. Web search or photo-sharing sites can now assume a user's location and adjust what they see to their local surroundings.

San Francisco start-up Stitcher (http://stitcher.com/) introduced software in February that detects what streaming audio news iPhone users like and lets them "stitch" audio programs into personalized radio stations.

With GPS, Stitcher can deliver local news, weather or sports, co-founder Mike Ghaffary said, calling it "YouTube for audio" -- for when users are driving or unable to watch video.

The iPhone 3G also works on faster networks, so software runs twice as fast as the first-round devices. This makes it more effective at running complex software with functions that trip up phones on slower networks, forcing users to hop on standard computers to get any real work done beyond replying to e-mail or quickly scanning the most vital work documents.