The lens protector on the iPhone 4 (and other iPhones) have a tendency to get scratched. I'm not sure why Apple chose to use cheap plastic instead of glass... after all, it's a camera. I tried buffing the lens, but to no avail. Apple charges something like $30-$40 to replace the "lens."
This temporary fix cost me nothing since I already had these screen protectors in stock (I found them on Amazon for $3.66: http://amzn.com/B002C6MOO0). Why does this work? The liquid adhesive fills the tiny scratches on the lens.
Even if you don't have this problem with your iPhone camera, I'd recommend placing this screen protector on the back of your iPhone to prevent future damage.