The improved camera on the iPhone 4S is a big new feature of the device. Matter of fact, the camera is so good point-and-shoot makers like Sony, Canon, and Nikon should be seriously worried about their sub-$200 camera sales.



From TUAW:

Below you can check out a video of the iPhone 4S camera's image-stabilized footage versus the iPhone 4 camera's non-stabilized footage. Do note, however, that the iPhone 4S achieves image stabilization digitally without the use of in-camera optics, so stabilized footage will be slightly zoomed in and cropped compared to non-stabilized footage. However, when your footage is in 1080p, as is the case with footage shot by the iPhone 4S, you really won't notice any zooming or cropping at all.

  iPhone 4S video image stabilization in action