GIPS, a San Francisco-based company that licenses intellectual property including codecs for audio and video, says it’s come up with a technology that would allow third-party developers to embed video chat in their iPhone-related (s aapl) applications. The new technology is called VideoEngine (VEI) Mobile.

The VideoEngine utilizes H.263 (video codec), GIPS wideband/HD voice (iPCM-Wb) and G711 (audio codec) to provide functionality that would allow real-time video chat or multipoint video conferencing. GIPS is using the H.263 codec because it (and in turn the developers who use VEI) doesn’t have to pay royalties.

Despite GIPS’s statement, VEI can’t really offer real two-way video chat today. Why? Because the iPhone doesn’t have a frontal camera. At best, VEI can be embedded in a mobile application and thus can receive video from some PC-type application, say, from your PC using your IM client to the iPhone. Just not the other way around. Audio is bidirectional. In December 2009, Fring launched a one-way video calling service as well.

That said, I can only see one real value proposition of this new offering: tight synchronization of voice and video that will end up on the iPhone. And I’m not sure if that will be enough for GIPS to get the traction. For video conferencing to take off on the iPhone platform, two things need to happen: First, there needs to be a frontal camera for two-way video chats. Second, Skype needs to make available a video chat offering.

Skype it seems is unlikely to use VEI. It’s already licensed H.264 video technology, which is being included in many mobile phones. I wouldn’t be surprised if Skype ends up using some sort of scalable video version of H.264 for its mobile clients, one that adjusts the video quality based on the network conditions.

As for GIPS, let’s just hope the iPhone gets an upgrade of its dreams — one that involves a video on the front of the device.