Inter-App Audio was originally mentioned as a feature for iOS 6, but did not make the cut for that release.
Here how Apple describes Inter-App Audio:
Now your apps can make beautiful music together.
With Inter-App Audio, apps can register their audio streams to share with other apps. For example, a series of apps could publish audio streams of instrument tracks while another uses the combination of these streams to compose a song. Inter-App Audio also provides for MIDI control of audio rendering, remotely launching other registered Inter-App Audio apps and more.
It’s too early to tell how this will impact AudioBus & Jack, third-party tools for audio routing on iOS.
But it sounds like iOS 7 will directly address the needs of virtual instrument uses and some of the key complaints of musicians that wants something similar to VSTi’s on iO7. In iOS 7, DAWs like GarageBand or Auria should be able to automatically launch virtual instrument apps, as needed, to receive MIDI and translate it to Audio. This will require updates to both instruments and DAWs for support.
What do you think about the prospects for Inter-App Audio?