A new app called AirView has appeared in the App Store today, which enables you to use AirPlay from one iOS device to another. The two devices have to be on the same local network or you can stream direct from iTunes. AirView allows you to stream video from an iPhone to an iPad, iPod Touch or another iPhone or any combination of two.
All you have to do is install AirView on the device you wish to stream to, fire up the app then launch the video on the streaming device. When you play the video the usual AirPlay icon appears and you can select the device that you wish to stream it to. As if by magic, the video starts to play. This works with videos played in iTunes on a Mac or PC too.