I really love the camera in my iPhone4, I use it more than the actual telephone part. I tend to text, email or use facebook messages the most. I post photos directly from the phone that I process in an Photoshop app in the phone. It definitely has replaced a point and shoot, while not as good as my G11 was, it is better in that I have it with me all the time and it's really changed my attitude about keeping my vision in tune by shooting a lot more. Often when I have something extra nice I'll process it at home in Lightroom which had a calibration for the iPhone listed as Apple. I did a workshop with 16 teenagers last summer to help them use their smartphones as cameras better. When I started the class I asked how many were on facebook and all of them raised their hands, then I asked how many had posted photos from their smartphones and they all raised their hands. It makes sense to me. I absolutely love the iPhone camera.
One thing also nice is the upgrades don't cost me anything. The last two uprades I've sold my old iPhones via Craigslist and had the cash in hand in two to four hours and this covered the upgrade costs. The last time I was busy running errands and didn't get around to canceling my Craigslist post for 6 hours from the time I'd origionally posted it and there were something like 51 emails from people saying they wanted it and would come right now to meet me with cash.
For me it's a no brainer to keep using this and to appreciate the phone. I still use my MKIII but for other than non paying work - not often anymore. Yes in some ways the iPhone4 has replaced it but in a different way, I actually love the challenge of it's simplicity.