People say the iPhone is really a gaming device with a mobile phone bolted on. And given how much time I spend playing games on my iPhone, I tend to agree. The touchscreen, accelerometer and (mostly still untapped) ability to play games against others over Wifi or 3G make gameplay compelling.

Social Gaming Network (among the first to exploit the iPhone accelerometer to create Wii-like games), is coming out with a new jet fighter dogfight game. The graphics are stunning, and you can fight against computer opponents or other people playing the game.

This isn’t the first iPhone dogfight game (Flying Aces and Top Gun are popular), but the graphics are way beyond what I’ve seen with the other games, the social fighting aspect is a first and unlike those games, SGN’s will be free. I had a chance to play it this morning in our offices, a video of that demo is below.

The application hasn’t been named yet and is still a month or so from launch, but SGN says if you email launch@sgn.com they’ll respond back when the game launches. The game will be free, and eventually users will be able to pay to upgrade their jets and weapons. In the first version users will train and add levels, but when the iPhone 3 comes out this summer, they say, a war is going to break out.