A photo comparison from all iPhone version cameras taken with Camera+ (First generation iPhone, iPhone 3G, iPhone 3GS, iPhone 4, the new iPhone 4S), a point & shoot camera, the Canon S95 ($500), and a professional dSLR, the Canon 5DMKII ($4000+) in two situations:
A macro setting to test detail and quality of the cameras
2. A backlit skyline shot
The iPhone 4S is dramatically clearer and sharper than previous iPhone versions. Using separate focus and exposure in Camera+ on the iPhone 4 & 4S significantly helped create a more balanced exposure. While it's not nearing the same quality as a professional level dSLR, it is comparable to a top of the line compact camera and even outshines it in some ways.