It's unclear whether Papermaster, who came from IBM and was central to a non compete case between Apple and his former employer, was forced out or left on his own. After his 26 year tenure at IBM, Papermaster had replaced iPod father Tony Fadell, and will be succeeded by Bob Mansfield, Senior VP of Macintosh hardware engineering. Wikipedia notes that Bob Mansfield had initial doubts about his ability to fit in at Apple, but recognized that he was "immensely smart about microprocessor design, large systems, and semiconductors."
NYT points out that Papermaster was not on stage at Apple's recent press conference addressing the iPhone 4's antenna issues, though Mansfield and COO Tim Cook both were present. Again, it is unclear whether or not he was forced to leave or resigned, but it doesn't seem unreasonable to believe that amidst all the iPhone antenna controversy that someone took the blame.