The iPhone is more than capable of recording audio and video. But in order to get better recordings, you are going to need a decent microphone. If you are planning to record with your phone on the go using an external mic, you may want to give these portable microphones a look:
Belkin F8Z818eb iPhone Directional Microphone: a highly portable microphone with directional and super-directional settings. It works great for recording memos and lectures. Needs 1 AAA battery.
Olympus ME-51S Stereo Microphone: a stereo microphone for your iPhone. It includes a 3.3 foot extension cable with tiepin-clip. It can be plugged into the earphone socket.
IK Multimedia Mic Cast for iOS Devices: an ultra compact recording microphone for doing podcasts, interviews, and more using your iPhone. It has a stereo mini-jack headphone output with real-time monitoring.
Blue Microphones Mikey Digital Recording Microphone: provides you with better audio recording quality with your iPhone. It is made for the iPhone 4/4S and iPad. Works with the most popular recording applications.
TASCAM iM2 Channel Portable Digital Recorder: this pair of stereo condenser microphones offer 125dB maximum level for recording loud concerts and instruments. It has a built-in analog to digital converter.
There are other microphones you can attach to your iPhone to improve your recordings. The above products are compact and improve the quality of your recordings fast.