it's a gimmick and that's about it. I used it maybe 3-4 times when the iphone was first launched just to do it. but just like with the built in isight of my MBP, I never use it as I don't see the point.
Why would I want to use it? Never in public (so I can extend my arm and have other people looking at me like I'm crazy or easily steal my phone? no thanks). Even at home, I find it annoying to hold out my hand to hold the phone. I suppose I could set it down in the dock, but it's just pointless to me.
Perhaps if I had a kid and was away on business. Or if my girlfriend upgraded her 3GS and felt like giving me a peep show. Otherwise, forget it.