Probably no good in the UK anyway
Unfortunately I don't think the Square solution is valid in the UK as card holder present transactions are required to be verified by pin entry in almost all the cases that people would want to use these swipe readers.
I'm fairly sure Visa Europe's regulations would also prohibit this as the combined device (square magstripe reader and iPhone) isn't an approved PED/POI or whatever the current three letter acronym is they use. Not sure what the other card brands would make of it.
Very interesting though, perhaps if the mobile operators had got there act together and implemented something like the MPESA system we would be able to do some simple mobile based payments over here anyway.