There are lots of player (MPlayer or vlc-player) available which can play almost all the popular video formats on iPhone. Though they are able to play movies but the quality is not up to iPhone standards. To get a good quality you are required to convert movies to iPhone compatible format.
In this category lot of paid softwares are available this gives you capability to convert all the well known formats to iPhone compatible format. I found FreeVideoToiPhoneConverter freeware which does the same. The only advantage is that it’s free of cost.

These softwares take lot of time (1/2 hr to 2 hr) for converting a movie of 800 MB to iPhone format (mp4).

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1. vlc4iphone – Media and streaming radio player
2. MPlayer on iPhone
3. Installing MPlayer on iPhone
4. Recording video in iPhone (V 2.0.1)
5. Flash Player plugin for iPhone mobile Safari