This is what is being touted with the new camera (source Apple Insider)
"Each iPhone 3G S features a new 3 megapixel autofocus camera that takes pictures and video, making it easier than ever to capture, edit and share those moments instantly with family and friends. The new autofocus camera adjusts focus, exposure, color and contrast for the best possible image and includes an automatic macro focus for extra close up shots.
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With the new "tap to focus" feature, you simply touch the display to select an object or area of interest and the camera automatically re-adjusts focus and exposure. You can record high-quality video clips and edit them right on your iPhone 3G S by simply trimming the start and stop points. You can also send photos and video by email or MMS and post them to MobileMe or YouTube with just one tap."
I believe that the extra utilities that come with the camera are more than compensating for the 3mpix device, that is currently less than what Samsung, Nokia, Sony and many others offer.
cheers ...