Sorry for the crappy video.
As far as I know, there is no one using an iPhone like this.
This app is called FiRe and is about $6 on itunes. Basically it is a high quality field recorder with some neat features. With an adapter cable available at kvconnection.com/product-p/km-iphone-2trs.htm , you can interface a microphone such as a Rode Videomic and use the iPhone as both a recorder and a preamp. Unfortunately, there are not a lot of good microphones made for the iphone 4. For the 3Gs and earlier, you can use a "Blue Mikey", which is a nice little stereo mic used by a lot of musicians.
In the video, I have manual audio levels set to 5 clicks above bottom on my 5D and the headphone out on my iPhone set to about 1/3.
The app also has some great real time filters such as the "hiss reducer".
There is a free version of the app called "Blue FiRe" as well.