The much rumored and much anticipated iOS 5 speech to text feature is currently in testing. A source leaked the below image to 9to5Mac which shows a microphone button to the left of the spacebar.
Clicking the button will transcribe your speech to text and input it into the text field.
To make way for the microphone icon, the @ symbol and full stop have been dropped from the the default view.
It is not yet known when this speech to text feature, which is powered by Nuance, will arrive in iOS 5.