Hello jjtd,
In order to get the iphone to process ics attachments you have to configure a calDAV account in Settings > Mail, Contacts and Calendars > Add Account.
There are several presets and other ways to configure calendaring services after that choice, Exchange, mobileme, gMail, Yahoo, AOL and Other.
Other is going to give you the option for a calDAV account and that is what you need to get the iOS native mail app to process to ics files and add them to your calendar on the phone.
You will need the server name of the server running the calDAV service. For gMail it's m.google.com (along with everything else Google provides for mobile devices.) For Exchange it's whatever your company's Exchange server is called if it allows external connections. (Ex: servername.domain.com)
You will probably need to work with your IT department to get the names if it's a corporate Exchange server and/or vpn services configured if that is the policy. The consumer providers tend to be simple and you can find the required information with your friend, Google.
A recent comment says that the latest iOS update just adds event to your calendar even if you just have mail configured on the device. I cannnot confirm but maybe this is now resolved.
Cheers.