FFmpeg itself can be used in iphone applications distributed in the AppStore. See Wunderradio for an example: http://www.wunderradio.com/code.html
BUT ... I am now experimenting with this, and I'm a little disappointed with the quality of the result. (not to mention the encoding is sloooow on iphone). It seems to me that without the x264 library it is impossible to create mpeg-4 video with decent quality. And x264 is licensed by the GPL, so if you use it, you must uncover the whole source of your project. (Or did anyone understand how to choose some useful codec from LGPL-d FFmpeg?)
I do not understand that there are now many video editing applications in the appstore. How do they work? I did a rather thorough search and could not find any mpeg-4 codec with a sufficiently permissive license. Do they violate the GPL? Do they use a private API? I really do not believe that they built the mpeg4 homebrew encoder.
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