Pundits have been hoping for a couple years now that Apple would give the iPhone support for ebooks made with iBooks Author, and now that it has arrived I do not think it lives up to the anticipation.
The iOS 8.4 update was released today, bringing with it Apple Music, bug fixes, and new features in iBooks on the iPhone. The app now supports the display of the fixed layout ebooks made with iBooks Author. Those ebooks were generally made to fit a 9.7" iPad screen, so for obvious reasons Apple had previously stopped you from trying to view them on a 4" iPhone.
But now that we have iPhone 6 and iPhone 6 plus (4.7" and 5.5" screens) Apple may have thought the screens were big enough that they could handle squeezing such a large page size down to a smaller area.
I'm not sure I'd agree. Talking New Media has beaten everyone to the punch and posted a video which shows what an ebook designed for the iPad looks like on the iPhone.
The tl;dr version is that it looks about the same as if you took an 8.5x11 PDF and zoomed it to fit a smartphone's screen. Apple does add a few tweaks to improve the experience, including a TOC menu and an option to zoom in on a body of text (this can be either a true zoom or more of a reading mode where everything but the body of text is stripped away).
It's workable in a pinch, but I agree with TNM that it would be nice if Apple would update iBooks Author with new iPhone-centric templates. That would let creators update their ebooks with designs that properly fit iPhone screens.
Update: And Apple has listened. The new version of iBooks Author includes iPhone templates.