Nokia announced today that the next version of the S60 smartphone software on Symbian OS will support touch screen interfaces.

The S60 touch user interface comes with support for tactile feedback, which means that there is a physical pulse and feedback when the user taps on the screen. This provides better awareness of the device's response improving the user experience.
Existing S60 3rd Edition applications will run on touch enabled devices unmodified. Tools will be made available for developers to further optimize the touch experience of their applications.

The new S60 software is also supposed to support motion, orientation, proximity and light sensors.

The S60 will be also the first mobile software platform to integrate Macromedia Flash Video. This allows you to view on the go Flash-enabled Web sites and Flash Video, such as YouTube, as you would do on your desktop.

These technologies will be available for all S60 device manufacturers during 2008.
So it looks like we will also be seeing a Nokia touch screen phone to battle the Apple iPhone in 2008, who would have guessed that.
Via this Nokia press-release.