The iPhone does pretty well in a pinch, but with no focus or lighting control, you get just what you expect.
While the images are not really "print" quality, they work well in a DVD production or streaming video because those technologies have a lower resolution requirement. It has to do with the difference between printing with ink (dots) and illuminating pixels (light). An image that is very small or even low quality can often look pretty good on a TV or Monitor.
Try taking an image with your camera phone and then printing it out and viewing it on your monitor. You will see the difference. Don't delete those images! You never know when you might need them.