What is the best video format for the iPhone 5?

I have a 1080p video movie with about 5GB of memory space. I'm sure I won't be needing that much quality since the iPhone 5 has a small screen and a limited memory space.

So what should be the perfect video format for the iPhone 5 since it only has 1136 by 640 pixel resolution and 326 pixel per inch? Quality and memory wise.

And also I'm wondering if there is a difference in quality when viewing a 720p video and a 1080p on an iPhone 5 screen?