It’s not turning out to be such a great day for AT&T (T) and Apple (AAPL), as some enterprising hackers have unlocked the iPhone and made it ready for any GSM network.

Just like AT&T, YouTube will soon lose its exclusivity on the iPhone. When it does, you’ll be able to use the phone to watch videos from all over the Web, thanks to Veveo, an Andover, Mass.-based startup that has developed essentially the equivalent of a T9 predictive text input system commonly found on mobile phones that works with their video index. (Screenshot below the fold.)

First, Veveo’s Web crawler crawls the Web for video content; it then builds a smart index using the company’s own algorithms. Mobile phone users get this content via an application called vTap, which is where the predictive nature of the service comes into play.

vTap needs the input of just a few characters (vs. full keywords) in order to dig up what you’re searching for and present it for viewing on your mobile phone (right now it works primarily on Windows Mobile phones.) So for example, if you download the application on your phone and start typing “Om,” results including videos from “The GigaOM Show” and my recent appearance on “Wallstrip” automatically appear. (See: How it works)

The service is quite accurate, and, in my opinion, impressive. Since it’s not possible to download an application on the iPhone, Veveo has put together a special page that is optimized for it. Co-founder Murali Aravamudan showed off an iPhone version of the service to us.

In the demo I saw a very clean grid that displayed the video results, which can then be played back on the iPhone. The servers transcode the videos from the original format (be it Flash, WM, Real etc.) to mp4 format that the iPhone can play. Given the kind of mp4 file format the iPhone supports (it expects to get the entire file’s frame information apriori), there will be a larger latency of transcoding in the iPhone implementation compared with Veveo’s implementation in Windows Mobile or J2ME phones (both of which support “true” streaming.)

Many have been wondering how Veveo is going to survive as a standalone application. Some are also wondering why white-shoe venture capital firms such as Norwest Venture Partners, Martrix Partners and Northbridge Venture Partners would invest $14 million in the company (for a total of $28 million in funding over the last few years).

Veveo’s vTap is a consumer application, but the company’s video search and display technology is particularly useful for large telecom- (and cable-) based IPTV systems. Their video search powers Verizon (VZ) FiOS TV’s new interface, helping people finds tons of videos quickly from the large library of content stored on Verizon’s video storage servers.

Now since I live in San Francisco, I don’t care too much about Verizon’s FiOS TV (it’s not available here), but I do care about the iPhone and videos: Hell, I’m stuck with this thing for the next two years, so I might as well figure out ways to have fun with it.