Just to add to this thread, I don't know if you've seen elsewhere but the ID tech 5 engine is running on the iPhone smoothly (even predicted to run fine on 2g iPhone) and that is basically an improved engine of the one that produced games such as HL1, counter-strike and day of defeat. The possibilities are amazing, if a dedicated server client was released as well we could see 8v8 or 16v16 counter-strike on iPhone if someone at Valve is willing to take it on, it's just a thought, not wanting to get peoples hope up, but it's certainly possible, especially on iPhone 4, although it would be hard to find a control system that works for those games. My guess is that they wouldn't have ported (which must have taken a fair amount of time and money) what are esentially FPS engines to iPhone if they didn't plan on doing something with them. Very exiting times to be an iPhone gamer.
I was going to post this but was unsure if it would beach the rules but having had a read it seems ok. Here is a youtube video of the tech 5 engine running on an iPhone 4 originally from kotaku that someone has uploaded. BTW the camera is stuttering a bit, not the iPhone. http://www.youtube.com/watch?v=COimGlPmRpo&feature=player_embedded#!
Epic have been bigging up mobile gaming recently and seem to be making a bit of a push into that market. What better way to do that, and show off your tech than by releasing your own games using it? I think its pretty likely we'll see some form of UT from them, when though is anyones guess. Anyway, here's an interview from GDC 2010 I think, with the VP of Epic, who talks about mobile gaming being the future and Epic is preparing itself for that eventuality. He also talks about the (then recently announced) iPad in terms of gaming. Quite interesting, I think.