The iPhone 3G will surely give the executives at Nokia, Sony Ericsson and Samsung a hard time. But with the iPhone SDK and the upcoming App Store there are reasons for Nintendo and Sony to worry as well. When the SDK was announced, game developers leaped on the chance to develop games for the iPhone. The most recent attempt to transform the cell phone into a gaming machine was from Nokia with the N-Gage however it failed miserably. But the iPhone offers a lot more than the N-Gage, to start with it offers developers to use the onboard accelerometer, touch screen display and the powerful processor which can easily handle complex graphics. As seen in the above video Pangea Software's Cro-Mag Rally also uses the accelerometer so you can drive simply by "steering" the iPhone left or right.

The true genius behind the iPhone's gaming potential lies in the low introductory cost. Sure you have to cough up $200 or so for the device, but each game will sell for $10 while most DS games are $30 to $40. Now I'm not saying the iPhone should be seen as primarily a gaming device--it is first and foremost a cell phone no matter how you look at it. Also, the Sony PSP and Nintendo DS have dedicated controls and tactile buttons, which are very important for certain kinds of games--I certainly don't think Tekken or Zelda will translate very well to the iPhone. That said, for those who are tired of carrying around multiple devices, or those who just want a casual handheld to play games on the train or on the bus, the iPhone could definitely be a serious contender in the mobile gaming space.

Source