In April it was rumoured that the iPhone 3GS would be able to play 720p and 1080i HD video via the Apple AV Cables. When the device was finally released it was found that the video still played like its predecessors only supporting SD 2.5Mbps MPEG 4 or H264 video. But this turned out to a set limit by Apple, possibly to save the battery life of the device or to keep the old iPhone videos working on the new 3GS model.
A user of the Chinese website WeiPhone did a lot of testing with the iPhone 3GS and they discovered that it can in fact smoothly play HD video at 30Mbps at a 1080i (1980×1080) resolution. This was achieved by uploading various HD movies to the iPhone 3GS using the program FileAid and then running them via the iPhones built-in video player.
Playing back HD video on a iPhone is very useful on the small screen and the battery usage would drain a lot quicker. However is you used Apple’s Component AV Cables and it would be possible to run HD video from the iPhone.