I don't have an iPhone, but reports from users confirm that the OS in the device released June 29 has language capabilities that fall short of those in OS X Tiger. The user interface and keyboard input are English only. Text display in the browser (presumably the same as in email and other apps) includes W. European, E. European, Greek, Russian, Chinese, Japanese, and Korean. But no font is provided for Vietnamese, Arabic, Hebrew, Hindi, Thai, or Tamil, all of which are part of the full Tiger OS, or Tibetan, rumored to be added in Leopard. This particular iPhone is, of course, intended only for the US market.
A photo of a language test page can be seen here.