That's because it appears your wifi connection has to be pretty slow. The iPad app supports much better quality video, up to 720p video based on your connection. It can go all the way down to that depending on your connection, though Netflix uses a variable bit rate, so to make sure there is no stopping to buffer, the app automatically adjusts the video quality. I can only hope the iPhone app supports 720p video on the iPhone 4's Retina Display.
Netflix sure is taking their time releasing the iPhone app. Maybe it's due to license problems since they may not have licenses for all content to be streamed to a mobile phone (the iPad could have easily been classified as a personal computer).