As per WeiPhone report, the iPhone 3GS can playing back both 720p and 1080p video encoded in H.264 in its built in player.
According to an iPhone 3GS user, he transferred video files of increasing resolution and bitrate to his iPhone using the FileAid iPhone application and observed that iPhone 3GS was capable of playing the video files of up to 1980×1080 resolution encoded in H.264 format at over 30 Mbps smoothly.
As per iLounge, Apple may be putting arbitrary limits on video playback to save battery life keep things consistent with previous iPhones.
Using the free document storage and viewing application FileAid, forum member fridtear was able to circumvent Apple’s video restrictions, smoothly playing back files up to 30 Mbps in 1980×1080 resolution via the iPhone 3GS’ built-in video player.
iPhone 3GS is limited to the same 640×480 resolution, 1.5 Mbps standard used by older iPhone models.Because of 480×320 iPhone display, it will not be useful to view 1980×1080 resolution HD videos on iPhone. However, getting output of HD-videos using component AV cable might interest some users.
There are possibilities that Apple may be saving this feature for the future firmware or future iPhone HD itself. or didn’t enabled it because of battery drainage?