The iPhone is great for watching video, but converting movies from high resolution to a format suitable for the smaller screen can be a slow and tedious business.

With online backup service Livedrive’s recently updated app, however, there’s no need to transcode: you can stream videos directly from backed-up files.

Free to all Livedrive account holders, the app allows you to select between three levels of quality to suit the speed of your 3G or Wi-Fi connection.

Once you’ve don’t that, just browse to the backed-up file, wherever you stored it on your PC, launch it, and after a few moments the video will begin to play. Livedrive’s servers do all the hard work, transcoding the video and resizing it on the fly. It works fine over 3G too, but you need a good, strong signal.

In its top quality setting over Wi-Fi, videos don’t look quite as sharp as when converted properly and played locally, but they’re perfectly watchable. And it doesn’t only stream video, but music files too. Tap the Music button on the app’s home screen and you can browse by artist, album, year and genre, as if those files were stored locally.

The potential storage space savings are huge. You can have terabytes of videos stored on Livedrive’s servers and have access to all of them on your iPhone without wasting valuable local storage.

Livedrive’s online backup accounts aren’t pocket money (they start at £36 per year), but you get unlimited storage, peace of mind and, with the new app, access to your media files wherever you are. Plus, if you don’t want to take the plunge right away, there’s a two week free trial.

Want more iPhone apps? Try our 73 best iPhone Apps feature or our previous iPhone Apps of the Week.