Which version?
As jam bo says the camera on the iPhone 4 isn’t too shabby – not amazing, but plenty good enough.
But the cameras on the older models were pretty pants.
By the way, some recommended camera apps:
Camera Genius – separate focus and exposure points, burst mode, guidelines, self-timer, filters.
SynthCam – emulates the DoF of a bigger lens by capturing mutliple images and combining them.
Pano – easy stitch panoramics.
And when you are out with your DSLR, PhotoBuddy provides useful shooting info like DoF calculator, angle of view, Sunrise/Sunset, and equivalent exposures.