They do, and it has made some noticeable improvements. Compared to when it first came out, "portrait mode" on recent iPhones is a lot less likely to blur individual hairs on a person, or keep the background seen through a lock of hair in focus. But IIRC the iPhone lidar can only distinguish something like 16 depth layers, and at the end of the day the blurring is still computational and "fake", I don't know if it will or can ever reach parity with what a large lens can do.