PC Magazine tests Skype for iPhone with video calling:
We tested Skype on an iPhone 4, a 4th generation iPod touch, and a desktop Mac, over both Wi-Fi and 3G networks. Calls took a bit longer to connect than expected. Some started quickly but others took upwards of 10 seconds to connect. Audio came through first with video appearing a second or two later. Audio and video quality started off somewhat jerky on each call, but they smoothed out within a few seconds.
My tests gave similar results. Initial connection was slow, video and audio are choppy at times, but it works on AT&T’s 3G network. Not bad, but not FaceTime.