Work is being done on a MAME port for the iPhone. MAME is the Multiple Arcade Machine Emulator that allows you to run old arcade games (provided you have the proper ROM)
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The project appears to remain very much a work-in-progress:
Project to port SDL MAME to the iPhone. The main cool feature I want to add is configurable layouts for touchscreen controls and crazy gesture based inputs. Whether MAME will actually be playable from a performance and control perspective remains to be seen.
Unfortunately, at this time, while it appears to have been built, controls don't work yet.