This may or may not be old news, still The iPhone Fever has to serve it's role as an index of how much FAIL you, my dear iPhone user, are willing to pay for.
Some iPhone 4 owners have reported color oddities with photos they’ve taken with the camera on the back of the newly released phone. The iPhone’s 5-megapixel camera will take mediocre images in low light with, or without, the LED flash.
Images shot in warm, indoor lighting without the flash, have an obvious yellow and sometimes green cast to them. Sure, get a real camera for photography you'll say, but unfortunately the exact same photo taken with an iPhone 3GS or 3G will not (so just like signal GSM is somewhat a downgrade from 3GS) . You can see for yourself in the image below—the photo shot by the iPhone 4 (original file here) appears in the upper right corner, while the 3G and 3GS images (original 3GS file here) are on the left. I also included a photo shot by a Canon 5D digital camera for the sake of comparison, check below.
Apple hasn’t confirmed what’s causing the issue—in fact, the company has, as usual, yet to respond to our e-mail asking about the issue.
Many of the iPhone 4 users who are experiencing this yellowing problem are also seeing yellow-green flesh tones when using the LED flash in similar low-light situations (while others, in the characteristic iTurd style completely deny the issue). The combination of the LED’s cool blue light with the warm interior lights gives skin a sickly green appearance—one that could be also be fixed with proper white balance.
Unfortunately, fixing these JPEGs with iPhoto, Lightroom or even Photoshop is hardly possible. Hopefully, this isn't a hardware issue involving the camera's lens, and Apple can fix the problem with an update to the iPhone 4's firmware. Currently, Apple’s Website doesn't offer any help document for the yellow images; Apple customer service has no official recommendation other than to let you exchange your iPhone 4 for a new one. There is no guarantee that the replacement iPhone wouldn’t experience the same issues.
[update 01.03.2011] The issue is still not fixed by the latest iOS update.