iPhone animation system

I hoped someone else would reply to this because it's something I'm dealing with myself, and I'm no expert on the topic.

As I understand things, the tradeoff is that vertex-based animations are cheaper on the processor, but skeleton-based animations consume less memory (though the processing cost of skeletal animations can be mitigated by doing the work in a shader instead of on the CPU (but then shaders are only usable on the most recent generations of iPhones and iPod touches)). Based on that, then, the best approach for you is based on what resource you have more of: processing time or memory. Again, that's how I understand it, and I could well be wrong on any point.

I'm slowly experimenting with different animation techniques, though I don't have any benchmarks yet. I'm currently trying a vertex-based format, with space costs reduced by using a fairly low animation framerate (8 fps) and storing the vertices as bytes instead of floats. I'm also minimizing the processor costs by not even lerping the animations, so to render a frame of animation I just have to point glVertexPointer at data that's just sitting in memory. This is essentially equivalent to how animations were handled in Quake 1. My plan is to move forward with more advanced techniques if I find that the iPhone is able to handle this technique easily while still pulling off a good framerate with the content I want displayed: lerping animations if I have the processor budget available, storing vertices in floats if I have the memory budget available, etc.

I still hope to see others reply, because I'm very much learning about all this myself.

You could try looking at the oolong engine ( http://code.google.com/p/oolongengine/ ) for some examples on skeletal animation on the iPhone.
You'll probably want to steer away from the keyframe based animation, as I believe memory bandwidth is more of a concern than processing on the iPhone, so you may find skeletal animation is just as fast as keyframe, as you have to transform it to world space anyhow, and you'll have more memory available too.