It's a common phenomenon. As soon as a new iPhone is announced or close to being announced, people flock to stores to trade-in their old phones so they can get full value before price drops knock down the trade-in price for them. We're still more than a month away from the iPhone 5's rumored launch, but the trade-in exodus has already begun.
According to CNET, eBay has seen a huge increase in iPhone trade-ins through their Instant Sale program. The 70 percent increase has been mostly through trade-ins of the iPhone 4S 16GB model with the 8GB iPhone 4 and 32GB iPhone 4S closely following.
It seems kind of silly to sell your phone this early when we don't even know if Apple is going to hold an event in September. If the rumor is true, selling it now might not even be the best course of action as you'll be sitting on a few hundred dollars of PayPal credit for at least a month. Of course, the rumor does seem legitimate and a September launch would fit perfectly into Apple's plans to dominate the holidays.
It's important to note that eBay's trade-in program runs year round. The increase isn't any indication that the iPhone 5 is near. The real indication will come in the form of retail partners getting their trade-in programs ready. Best Buy and RadioShack have both traditionally been in the trade-in business and their participation would signal that it's time to get excited.
Trade-in programs aren't the only place where old iPhones go. A study from yesterday revealed that many iPhone owners option to hand off their old iPhone to family members when they go buy the newest model. Either way, the cycle of used iPhones leading to new iPhone sales remains unbroken.