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Translation of the camera changes the perspective, i.e., the relative positions of different objects in the image. There is no way a piece of software can get rid of that, because the information isn't there in the first place.

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The information is there in sequences of images through parallax precisely when the camera translates. We know how to do 3D reconstruction of scene geometry from a single moving camera.

https://www.youtube.com/watch?v=fLnd9ucUu9Y

Skip to 1:15 to see a textured reconstruction.

The first real-time example was Davison et al's MonoSLAM paper of 2007, I think.

Keep in mind that SLAM assumes a static scene. To stabilize a video with a moving target would mean that there's still going to be parallax otherwise you're going to get shadows (see the cool video on Oculus time warp: https://www.youtube.com/watch?v=WvtEXMlQQtI)

People are now managing to segment parts of the scene by motion, so that moving cars and pedestrians, for example, are known to be distinct from the camera's ego-motion. The static scene assumption is not strict any more.

Don't forget that an iPhone has sensors other than the CCD, so it knows when the camera is being twisted / translated around. You would need some depth perception to recover the image, but lucky you, that's exactly what you get if the camera is moving.

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