Hidden inside the iPhone OS 4 beta are an interesting set of codes for video capture :

That seems to indicate that the iPhone 4G will be able to record in 720P HD, much like all of those Flip HD type products out there.  It also makes it slightly more likely that the iPhone will be called the 'iPhoneHD'.  Slightly.
It is uncertain if current iPhone 3GS's possess enough processing power to record 720P video.  It also makes us think that 64GB is going to be the sweet spot in storage on the next iPhone.