Video/Image processing on Apple iPhone4
I think you'll get the answer in the iPhone 4 teardown that the guys at iFixit did sometime ago:

http://www.ifixit.com/Teardown/iPhone-4-Teardown/3130/1

You will be able to see there what components are inside the iPhone 4, but I'd guess all the video compression/decompression is processed by the A4 processor (an ARM Cortex A8 core variant). 

http://www.ifixit.com/Teardown/Apple-A4-Teardown/2204/1