As pictured above, you can see a piece of plastic sits behind the ingress protection (waterproofing!), right where the headphone jack would have been. And (update!) according to Apple it's a "barometric vent." Apparently adding all the waterproofing to the iPhone 7 and 7 Plus meant that it was more of a sealed box, and so to be able to have an accurate and working barometer, Apple used that space. The barometer is the thing that allows a phone to measure altitude, and Apple points out that on the iPhone 7 it can measure even minor changes like climbing a flight of stairs.
Apple has also been pretty consistent in arguing that the removal of the headphone jack isn't just about the precise physical space that's right there on the bottom-left of the phone. As
BuzzFeed reported, Apple says it's more about the entire thing — the Taptic engine, the larger battery, easier waterproofing, the top speaker, the antennas, etc.
@ half the posters in here arguing.