What possibility? The iPhone can not play videos in HD! It's as simple as that.
THANK YOU! At least someone gets it.
I feel like this thread is full of people who bought and blu-ray player, plugged it into a SD TV and thought they were watching a movie in HD. Ignorance is bliss, I guess.
The reason why this is a potentially exciting development is that the iPhone 3Gs would be capable of doing this... in HD.

yeah yeah, i know the pico-projector maxes out at 480p, but it's the idea that counts.