I can see why a professional photographer or serious amateur might want these dedicated cameras, but for basic documentation of a trip and even video I've been amazed at how well the iphone4 does. The optics are basic, but good enough for the 99% ;0 and now that there's some zoom and flash capability the worst problems of the previous iPhones are gone.
Actually the worst problem of the iPhone, the difficulty of composing and focusing a shot with direct sunlight shining on the screen, is still present in the iPhone 4 and 4S. They're certainly better than nothing, but I'd pick my Panasonic GF1 (with the LVF1 view-finder) and 20mm/f1.7 lens over my iPhone 4 any day of the week...