This is why I'm looking forward to 2008 more than anything else-- MacNN reports that psx4iphone, the Playstation (PS1 or PSX) emulator for the iPhone has now gone public. The files are available for download, and we're told that the emulator should be available on Installer.app soon (if not already-- this news dropped over the weekend).
There's no official word about playability (as you can tell from the video above, it is running, but not in a state where you could actually play it), but work is still being done. What this does tell us, fortunately, is that it's possible to run 3D on the iPhone. And as MacNN says, that means there are big things ahead when the official SDK drops in February. Of course, we still don't know what the dev kit will be made of (and who will get to use it), but if this is what can be done unofficially, I can't wait to see what will be done with an official SDK.