Logically speaking, it shouldn't be a huge surprise. But a friend in the industry told us that they've seen H.264 1080P video playing on the iPhone, quite a few times, with no problems at all. Of course, the resolution is absurd overkill for the system's screen, but what's this mean in light of the purported iTunes 8 HD? Potentially a lot.

if iTunes 8 indeed goes HD, the iPhone is more than ready to run its content natively—especially considering that iTunes HD clips would probably be the same as Apple TV's (which is just 720P). That means no needing to convert HD clips for the iPhone/iPod touch (or maybe even the next generation of iPod?), which would seem more like Apple's style.

And while running videos at a higher resolution than needed isn't ideal for processing or syncing times, who knows, with the right adapters, maybe the iPhone could even put this video on your HDTV.

it would be ridiculous to play HD content on iPhone's tiny (by HD standards) screen. Additionally, it is unclear as to what kind of HD content these sources are referring to. It could be a small clip or even a minutes worth of HD stuff. Do you think the iPhone will be able to handle a full-blown HD movie? Does it even have the battery power to support a full-length HD flick? Doubtful.

Source : GIZMODO