Modgirl, which iPhone version do you have? You might try cleaning the lens of the camera with a very soft cloth. (I had an old phone that got some lip gloss on it from my bag. It turned the photos into a very dreamy look. it was before a lot of the camera apps that are out now and I loved the effect! I called it my McDreamy phone :). ) If you have the new version with two cameras, the one that points toward you is not as good a quality as the one that points outward. Also, any zooming in or very low light levels will add graininess.
I wonder if a hard reset would affect the camera? When my phone acts buggy, I do that...here's a link on the apple site: http://www.apple.com/support/i.....ant/phone/