The first thing I thought of as I started reading AppleInsider’s item titled…

Apple looks towards digital media sharing during iPhone calls

…which partly describes this as…

such as the ability to share and control playback of digital media files like music tracks and video during a telephone call

…was, “Hey, this sounds sort of like Microsoft’s Zune squirting feature”. Squirting used the Zune’s embedded WiFi feature to send a song from one Zune to another nearby Zune. The Zune receiving the song could play it for three plays or three days (whichever came first).

Apple’s concept goes quite a bit beyond Zune’s squirting but enabling sharing music files, video, images, voice mails and podcasts. And, the second party does not need to be in the vicinity. This sharing can occur with any other iPhone that is called by another iPhone.

The ability to share photos and video (assuming the new iPhone can record video) will completely eliminate the need for MMS between iPhones (a good thing IMHO).