They could've used that space for other new features. I preferred the cut/copy/paste pop up immediately after highlighting. It would have been nice to see italic, underline, font color, highlight, size, etc.
It's terrible. I'm a writer/editor/blogger and it is sooooooo frustrating the way it is now. Then again, I don't use the landscape keyboard either, so I'm probably going to have to get used to the entire thing...but I will!
I actually think it may be a highlighter. Looks very similar to the highlighter icon in OSX's preview. I think paste is the icon to the right of cut. Only question is where is the copy button... there may not be a copy, just like there's no italics. maybe they let you choose from a selection of buttons to put there like customizing a toolbar in OS X.