It was bound to happen sooner or later. A developer going by the screen name Kaisersoze has successfully ported an initial build of MAME to run on Apple’s iPhone. The iPhone version is based on the SDL version of the emulator, which was originally designed to run on Ubuntu Linux.
For those of you living under a rock, MAME is the Multiple Machine Arcade Emulator, the de facto, gold-standard for playing classic arcade games. While the initial port runs slowly, I’m sure optimizations will be done over time to let the iPhone play your arcade favorites at a reasonably accurate speed. The developer claims that some simpler games like Pac-man and Q*bert run at close to normal speeds, while many games don’t perform so well yet, even with frame-skipping on and sound disabled.
As is the case with all homebrew iPhone applications, you’ll have to do a bit of work to get it up and running on your phone. For those of you who know your way around a compiler, you can pick up the full source code and read more about the emulator over on Google Code.