Most small cameras, including those in every generation of iPhone, may exhibit some form of flare at the edge of the frame when capturing an image with out-of-scene light sources. This can happen when a light source is positioned at an angle (usually just outside the field of view) so that it causes a reflection off the surfaces inside the camera module and onto the camera sensor. Moving the camera slightly to change the position at which the bright light is entering the lens, or shielding the lens with your hand, should minimize or eliminate the effect.
In my experience, you have to try pretty hard to get a purple flare. I hadn't noticed it until I took a few shots of the sun yesterday. Despite all the hoopla, I'm not the least bit concerned about this. And contrary to speculation, this is not caused by the sapphire lens cover, as the same issue has been reported in other cameras, including the iPhone 4S.
Via The Loop