Can you take nice photos with an iPhone? Yes. Does it have its limits? Of course.
I have been experimenting with the photo capabilities of an iPhone 3G. The files are small, 600×800 pixels, but the image quality can be quite good under certain circumstances. This is a switch for me since I usually take photos with a full frame digital SLR. But I have been having fun with the iPhone and learning what it can and can’t do.