Skype has launched a new version of its iPhone app that features video calling – a bold move considering Skype is fresh off a major outage issue, and that this will directly compete with Apple’s new FaceTime feature of the latest iPhones. 

With the new Skype iPhone app, users can make and receive free video calls from their iPhone, iPad, or iPod Touch. It works with both WiFi and 3G connections. Skype recommends WiFi for the best quality though, and additional data charges may apply with 3G. 

The app lets users make video calls to people on their computers and other iPhones. It’s compatible with the iPhone 4, iPhone 3GS, and iPod touch 4th generation with i0S 4.0 or above.

"You can also receive video calls on the iPod touch 3rd generation and iPad," notes Skype’s Peter Parkes. "Calls can be made between devices using the new Skype for iPhone app and desktops including Skype for Windows 4.2 and above, Skype for Mac 2.8 and above, Skype for Linux and the ASUS videophone."

With the app, users can also make free audio calls to other Skype users of course. They can also make cheap calls to landlines and other mobile phones around the world.  

"With approximately 25 million people signed into Skype at any given time, our new iPhone app makes it easy to share moments with your friends, family and colleagues, wherever you are," says Parkes. 

That 25 million, by the way, is based on peak times in November.