With a resolution of just two megapixels, the camera was easily outclassed by many cheaper competitors and looked like it was decided on well in advance of the iPhone actually going into production, at a time when such a pokey pixel count would have been the norm.
The iPhone 3G sported the same camera, the 3GS took it to three megapixels, and it’s grown with each iteration since then.
So, what is the benefit of increasing the resolution of your camera? Quite simply, every time you add pixels to an image, you give the user the option of taking them away again while retaining a decent image size.
For example, if you half-filled a frame with a picture of your cat, and you wanted to crop away everything but your pet, you would end up with a very small picture had you shot it on the original iPhone.
If you’d shot it on the iPhone 4, though, with its larger sensor, even with only half of the pixels left you would still have an image larger than the full resolution picture shot by the first iPhone. Higher resoltion equals larger pictures, which in turn allows for greater flexibility.
The focus point on any iPhone since the 3GS is determined by where you tap on the screen. Do this on the iPhone 4 or later and tapping brings up a zoom slider, allowing you to change the framing of the image on which you’re focussed. Using iOS 5 you can zoom by unpinching on the screen.
This gives you greater freedom when using the phone to take photos. You can also opt to shoot high dynamic range images, in which the iPhone combines multiple exposures to achieve the best balance of shadows and highlights to draw out the detail in the scene.
Photos are automatically geotagged by using the iPhone’s built-in GPS receiver to mark them with the coordinates at which they were taken. These can then be used for filing, or for presenting your images on a map. They are also understood by services like sharing site Flickr.
Since the introduction of the iPhone 4, the camera’s final innovation is the introduction of High Definition video recording. Video recording on the iPhone 3G was done at at a fairly conservative resolution of 640 x 480 pixels. You can even edit your videos on the device itself using iMovie, which you can download from the App Store, and email or upload the results to the web.
This iPhone Camera Review Source :
The Independent Guide to the iPhone 4 - iPhone 4S, 2013 Editor Nik Rawlinson