There are no two thoughts about Apple's quality and hence its dominance in the mobile market. But, given the competition and the quality products available from other vendors, it becomes absolutely sensible to compare before showing more loyality to Apple than the your own pocket!

If you are a proud owner of iPhone 4 and looking to buy 4S, i would say that giving a thorough look at the new offerings in 4S as compared to 4 would make sense. This is because, i don't see major changes as far as upgrade is concerned. If you are a first time buyer, you should offcourse go for it after giving a chance to similar offerring available in market.

iPhone 4S Apple's India link. iPhone 4 Apple's Indian site link.

Here are some of the key differences and commonalities that i think matter:

1. Screen size is same i.e. 3.5 inch diagonally. "Bada hai to behtar hai" (means 'Big is better")! I personally like big screens and was disappointed by seeing the 3.5 inch screen n 4S too.
   Offcourse a 5+ inch screen would be too big to fit in my pocket but a decent 4 - 4.5 inch screen would have given a good experience and more screeen space for my fat fingers :)
   
   
2. Camera MP count has increased from 5MP to 8MP. But does MP count really matter while making Mobile purchase? Most of the time, it higher megapixel count would only add more detail to the image which may not matter if your only purpose is to share them on social network. If you plan to print large size posters out of those images, go for a hogher MP count, else 5MP is still a very good one.
   
   
3. Retina display: It was there in 4 and is same in 4S too. It helps with more clarity and higher pixel density to make things more clearer. No changes to the technology.
   
   
4. Video recording HD quality has been upgraded to 1080p from 720p earlier. This is a good addition for those who want more out of everything. As a matter of fact, both 720p and 1080p qualify for HD (High definition) video. 720p consuming less space than 1080p on your hard drive :).
   
   YouTube supports both formats. A 720p HD video would easily cost 1 GB for a 3-4 minute video. And 1080p would cost even more for same time frame.
   
   
5. Memory size of 16,32 and 64Gb in 4S as compared to 8Gb in 4. One thing that always pushes me towards non apple products is the flexibility to change things on your own. For e.g. Memory is fixed in iPhone whereas you can change/add the SD card later on in other phones as per your needs.
   
   
6. 4S is heavier in weight by 3 grams :) and price by about $200 in US and 15K in India. If you follow your heart, this does not matter. But in case you listen to your mind too like me, the green weight in pockte does make a BIG difference.
   
   
7. Processor is now Dual Core in 4S: A big addition. No doubts about it. But Samsung has already sold more than 5 million beauties with dual core and iPhone 4S is late.
   
   
8. Siri - Your personal assistant The most talked about feature in iPhone 4S is an application closely coupled with iPhone. It is possible that some other company may create a clone for it for Android or windows versions. At this point of time, it is not known but is certainly possible.
   
   Also, Siri is made for US accent. Indian or south asian accent is NOT officially supported. But I have heard Apple saying that it learns over the time and may be able to catch up the desi accent too :)
   
   
9. Maximum Data Download Speeds (HSDPA) has improved in 4S: iPhone 4S supports 14.4 Mbps as compared to 7.2 Mbps. But to enjoy the downloads at this speed, you network also needs to be a cheetah.
   You can certainly enjoy these speeds over Wi-Fi or broadband in high speed internet countries like Korea, USA and UK.
   
   If you talk about India where the 3G network itself is a luxury, these speeds are just a number and can only be used to boast about them in front of friends. Even the fastest broadband or Wi-Fi connection will not be able to match this speed in India.
   
   

Some more thoughts

Talking about the substitutes for iPhone 4S, the best one for me would be Samsung Galaxy S2 which costs around $600 in US and around INR 29K in India. The price is much less than iPhone 4S which is priced at around INR 50k In India.
In USA, iPhone 4S prices are 16GB for $199; 32GB for $299; 64GB for $399, with a two-year contract. Man, they are dead cheap there as compared to India :(
I would keep Samsung Galaxy S on the same table as iPhone 4 though. Both phones are quite good as far as a normal user is concerned. Good for gaming, recording HD video (720p) with good memory and processors. They are certainly much cheaper in price when compared to their big brothers. iPhone 4S in US is floating at $99 with mobile contract vs Galaxy S at $300 unlocked. In India, the price for iPhone 4 is about INR 35K vs Galasy S at INR 16K.

Electronics have always followed this trend. They are expensive if you buy them hot. Wait for couple of months and they will chill down and prices will offcourse come down drastically when their hotter version is launched.

Verdict

Buying an iPhone 4S or 4 for that matter is pretty expensive given the PPP (purchasing power parity) and the availability of much cheaper and comparable phones. Also, iPhone 5 may also be coming soon in a time frame of about 9-10 months. You can check out the Samsung Galaxy Nexus too if you find Galaxy S2 not attractive.
You can take your call after evaluating your love for Apple and your wife's love for your pocket :)

Official page of Apple's US site for comparison.