Yeah I am thinking they can’t cover it up. It’s gonna have to be open. Such an interesting choice.This is what I'm waiting to find out. Maybe it's possible to use glass or metal button/cover over the 'button' and we'll see some sort of cover on Apple cases.
If not, open hole in cases will be the norm.
Judging by the indent surrounding the hole, it definitely looks like a touch sensitive area with space needed for sliding, etc.