Yes, the 4-inch iPhone SE supports most of Apple's new technologies and features, including Live Photos, Apple Pay and more. It does not support 3D Touch, but it does include most of the same hardware found on the iPhone 6s and 6s Plus models. This includes a 12MP iSight camera with 4K video, Touch ID, and A9 processor. It also supports all the new features in iOS 9.3, such as Night Shift mode.
The iPhone SE is Apple's replacement of the iPhone 5s for people who prefer smaller smartphones. Apple sold over 30 million iPhone 5s models last year, making the 4-inch model a popular choice among Apple's customers. The iPhone SE includes a lot of the latest features found on both the iPhone 6s and 6s Plus, but it does not include 3D Touch. It also has a lower resolution Retina display (1136x640 at 326 ppi) due to its smaller 4-inch design.
The iPhone SE does not support Apple's stylus, the Apple Pencil. No iPhone models support the stylus at this time. The Apple Pencil only works with the 12.9- and 9.7-inch iPad Pro models. It is unknown if any future iPhone models will support the stylus, but if they do, support will most likely be introduced to Apple's larger sized models, such as the iPhone 7 Plus. The Apple Pencil is available for $99 on apple.com.
Yes, existing iPhone 5s cases are compatible with the iPhone SE.
Apple today officially unveiled the iPhone SE and 9.7-inch iPad Pro during a short keynote at its Infinite Loop campus in Cupertino, California. The new handset replaces Apple's existing 4-inch device, the iPhone 5s. The iPhone maker said it has sold over 30 million 4-inch models last year, proving that there is still demand for smaller smartphones. The iPhone SE is basically an updated version of the 5s that puts it more in line with Apple's current flagship models, the iPhone 6s and 6s Plus.