SEGA was showing off Sonic 4 Episode 1 at E3 for XBLA, PSN, and iPhone. The iPhone version looks very similar to the downloadable console games, and shares many of the same levels. There are two unique console levels, but also two unique iPhone levels.

We got some hands on time with the game on the iPhone, and it looks amazing. The game didn’t really have a noticeable difference from the game running on HDTVs right next to us. SEGA is working hard on this game, and has pushed back the release hinting at making sure it’s as good as can be before launching.

The game is effortless to control, and there is the fast paced action the Sonic series is known for. You can use on screen d-pad or tilt to control Sonic as he runs, jumps, and spins his way through complex levels. The game is a brand new experience, but yet still maintains the fun quality of classic Sonic, and just improves every other aspect of the game.

There is just so much detail in the atmosphere while you’re flying past it as only Sonic could. It feels great as you rely on your reaction time to make the jumps, spins, and slides to get through the levels. It really feels amazing with such a powerful game at your fingertips on the iPhone.

This is one of the best looking games I’ve seen on the iPhone, and it looks like it can really help push the bounds of what we think the iPhone is capable of in the gaming space. It’s way to early to tell, but this is one title to definitely keep an eye on, and it may even make it’s way on to the iPad, though no certainties.

The screenshots below aren’t from the iPhone version, but the game on the iPhone doesn’t look very different at all. There’s also a brief gameplay trailer to see the game in action. The game has no concrete launch date, but it’s expected late 2010.