Yes, iOS uses (parts of) FreeType. Imagine the shitstorm if they shipped their fuzzy, washed-out default rendering! The issue is that most people buying smartphones are not die-hard Apple fans like the buyers of their other offerings, so the font rentering would be pretty hard to sell.
> I thought that the fonts on an iPhone looked pretty good actually.
That's because FreeType (with the right patches and settings) is already pretty much the best font renderer (with a few exceptions).