I upgraded my 3gs to a 4s a few month ago mainly for the camera, no need to carry about a decent compact around with you all the time.
I found it to be great, only downside is the lack of deep of field, ability to fully edit the photos on the phone and taking pictures at night.
Here's a good comparison, first shot was with a canon 500d 18-200mm lens, second was with my iphone 4s set to HDR mode. Both then edited with camera raw.
No excuse now for saying "sorry for the crap pictures they were taken on my phone.
Heres a few other taken recently, edited on phone with instagram app.