The usability participants hold their iphone or android phone under the camera -- out of 12 participants, none complained about it and everyone easily kept their phone under the camera.
Webcam w/ screw mount connected to gorillapod which grabs onto inexpensive banana holder then outputs to ichat video preview. Silverbackapp from clearleft grabs audio and video from the isight camera and mixes it with the video preview from ichat on screen. Finally, silverbackapp outputs picture in picture video with large picture of the video of the iphone/android device and small inset video of the talking usability participant. (iGlasses is required, costs $10, in order to mirror the video in the ichat video preview -- so the text isn't backwards :)
This setup used all existing equipment that we had -- except the banana holder -- and would probably work well for companies building iphone/ipad/android apps and like to do their own usability testing in-house and want to video record the sessions.