I have a high-end point-and-shoot camera (a 14.7 megapixel Canon G10) that has never been quite as sharp as the megapixel count would seem to have indicated. The first shots I have taken with my new iPhone 4 have impressed me so much, and at times have appeared to be sharper than the G10, that I plan to do more shooting with the phone and less with the camera.
One of the first things you'll notice is that the camera falls a bit short in the area of dynamic range. While shadow detail is surprisingly good, bright areas tend to wash out. It definitely does not shoot in RAW format like the G10 does.
Overall, though, I think it does pretty well!
Here are some samples I shot around my yard the past few days. No adjustments were made, except for a bit of cropping.
