Epic today showed off an Unreal 3 engine for Apple’s iPod Touch 3rd-generation and iPhone 3GS. The demo, while reportedly still needs polish, shows off a lightweight engine that is well capable of taking advantage of Apple’s latest hardware. In simpler terms, this is what the future of gaming could look like for Apple’s mobile devices. With the iPhone 4th-generation six months away, we are certainly looking at an even better hardware architecture for high-end portable gaming. It’d would be safe to say Sony’s PSP and Nintendo’s DS are done for if the momentum continues.

Epic says they aren’t working on creating a game just for the iPhone, or even porting an existing title to the popular duo. It hasn’t even looked into licensing this technology to other studios, but it’s certainly in the future. Since the engine requires OpenGL ES 2.0, games built off this engine won’t work on previous generation iPod Touch/iPhone models. That’s to be expected, however. Just because Apple is a big proponent of backwards compatibility and treats their devices like regular computers, it doesn’t mean developers will be keen on limiting their games to hardware that’s two years old.