There are some apps that let the first generation iPhone record video with a reasonable quality. My question is, which api do those apps use? Do they use custom code for compression to mpeg? And how do they gather so many images per second from the camera, which does only allow to take still pictures? The takePicture function of UIImagePickerController would be too slow for that.
"This app works by using the long-blacklisted UIGetScreenImage() function that I've written about in the past. (I discovered this use by scanning the application using my APIkit scanner.) Apple must have willingly given the go-ahead for its use, as their automated scanning must have picked the same function call. Good news on the "more flexible review" front. Since Apple recently gave the green light to the UStream video app, with Qik hot on its heels, it's likely we'll see more of these applications that provide iPhone video functionality for livecasting or recording from your device." - http://www.tuaw.com/2009/12/14/app-store-approved-app-brings-video-recording-to-iphone-3g-and-1/
My summary: I think that the app opens a "Take a picture" type of view, and then "records the screen and saves to video" by using the UIGetScreenImage() API.