Indeed. The reason that pressure altimeters work on airplanes is because your starting altitude is known and you calibrate the barometer at that point. As the flight progresses, you keep it updated depending on weather readings on the ground.

But I guess the phone can just get this information from the Internet. (Or it can just set itself to 29.92 if the GPS says you're above 18,000 feet!)

I'm relatively certain they will be combined with gyroscopes for dead-reckoning [1] so that location-based services can nail you down to an exact office and floor indoors.

All this technology and I bet its primary use will be to check into conference rooms on foursquare.

[1] http://en.wikipedia.org/wiki/Dead_reckoning