"So the question is, are there large untapped areas where a phone could be used to interact with ones environment? What kind of day-to-day things could be enhanced with internet connected software?"This is why I find machine learning and optimization such fascinating areas to watch. At a certain point, we may reach the practical limits of what human gestures, commands, and requests can tap into or do. The machine (or rather, the distributed ecosystem of machines) becomes more and more important in automating X, suggesting Y, and predicting Z.
I enjoy the prospects of VR and AR, especially in an omniconnected world. Those always seem like interesting use cases for a smart(er) phone. But I'm a lot more excited about the non-UI advances that the "internet of things" can bring us. When we free ourselves from the limitations of human comprehension, human attention span, and human neurological heuristics, we can do so much more. To me, the "large untapped areas" are all the things we won't have to tap to access (terrible pun intended). Before we can get there, of course, we'll have to connect all the devices.
At the risk of sounding hokey, naive, or unapologetically futurist, I look forward to the day when kids will say, "Wow. When you were my age, you actually had to touch things to make them work?"