Even with the imperfections I am still exceptionally happy with the camera/camcorder aspect of the 3G S. If I wanted amazing quality I'll bust out my actual camcorder or dSLR but for quick pics and videos on the go or in very impromptu situations the 3G S is perfect IMHO.

What is and what causes the ‘jelly effect’?

No, it has nothing to do with the two babes that walked across the screen.

Watch the video. When they mention Jelly effect, and shake the camera, the buildings look deformed, like parallelograms instead of rectangles.

Its because the scan-to-pixels of the CCD is so slow that the building has moved on the CCD in the interval between the scan of the top line and the scan of the bottom line.

Each successive line is offset by a large enough amount that the building's vertical edges look slanted.

Faster CCDs will either lock the frame and scan the whole thing, or scan fast enough that this is not a problem.

You can even see this in still images taken with the iPhone. See this sample I took at dusk where you can see video tearing because of camera movement: http://i479.photobucket.com/albums/rr151/icebike/photo-3.jpg [IMG]http://i479.photobucket.com/albums/rr151/icebike/photo-3.jpg[/IMG]

With video its even worse. My Olympus locks the frame while it scans it, as do most cameras, but apparently Apple's camera allows the image to flow across the CDD as the scan progresses.