Yes, the 3GS does include basic editing tools, but very basic, and no effects at all (stitching, etc). Now that all changes with the release of ReelDirector for the iPhone.

Nexvio’s iPhone app makes up for Apple’s omissions by adding in the ability to add titles, basic video effects and, most importantly, clip stitching as well. Simple and easy to use as well, according to the company.

Now bear in mind: this is not a Final Cut Pro type interface or anything. It isn’t anything earth-shattering, according to comments on various blogs. Many are pretty much saying its ‘iMovie’ with a very slick front end, which is still an improvement over the default movie editor included with the 3GS.

Now watch: There will be avalanche of “made and edited on the iPhone” videos to flood YouTube and other such venues.

The app will run you $7.99 in the App Store right now.