Everyone that takes shots with point-and-shoot cameras in low light experiences this.
This.
To get a good shot in low light, you (or rather, the camera, as it is automatic) have 3 options:
- lower shutter speed (collect more light by opening the shutter longer - if the shutter speed is slow enough you may need a tripod or other STABLE/fixed support for the camera - your hand will shake too much)
- higher ISO (make the sensor more sensitive to light - this causes noise - random coloured speckles)
- add more light
If you don't add more light, the iphone (or any camera set to automatic - including full on SLRs) will attempt to balance shutter speed and ISO to get enough light for a visible picture. Neither of these options are "free". You get speckles, more blur, or both, depending on how dark it is.
Small point/shoots and phones are limited in lens size for capturing light so they ramp up ISO and slow shutter speed lots in low light. This is the major difference between a proper camera with a decent lens, and a compact/phone camera. The bigger lense can capture more light and thus you can shoot in the same light with no flash using higher shutter speed and/or lower ISO for clearer/sharper shots.
The iPhone 4-s has a good lens for a phone, but it is still limited in size and will never rival a proper camera in low light conditions.