So you upgraded to the new iPhone iOS 4.0? You can not only upgrade to the latest version but also jailbreak it and unlock it too.
However along with many many (more than 100) new amazing features in iOS 4.0 introduced by apple for the new iPhone / iPod firmware, one of them is the zoom feature for image snapshot and also for video recording.
While using the iPhone builtin camera (either for pictures or for video recording) just tap on the screen once and it will show the zoom bar like this:
The wonderful 5x zoom feature is a really essential addition to the iPhone OS! :)