Big Stage Entertainment is bringing 3-D facial modeling to the iPhone . . . sort of.

The Los Angeles company’s newest app (dubbed iStage) lets users snap photos of themselves with their iPhone cameras and convert those photos into three dimensional photo-realistic avatars. To avoid taxing the iPhone’s hardware during the process, the application uploads the pictures to Big Stage’s servers, where it performs the 3-D conversion. Once the conversion is complete, the server shoots back the avatar, which can be inserted into assorted mobile content like photos and videos shared on sites like Facebook and MySpace.

Though the app has a certain ‘gee-whiz’ appeal, it’s all about mobile marketing. Company executives are betting it will appeal to brands interested in creating personalized mobile media campaigns. Chief executive Phil Ressler said that with more than 17 million iPhones sold to date, and a recent study concluding that iPhone users are more likely to respond to mobile ads, the company is providing a new way for marketers and advertisers to engage with consumers on a mobile platform.

Although creating an avatar via iStage is entirely voluntary, users may find it unsettling to see their own faces show up in ads. But if Big Stage’s mobile campaign for the movie The Spirit is any indicator, iStage’s applications trend more toward the comical than the creepy. Regardless, the litmus test will be whether the novelty of home-grown 3-D avatars translates into engagement (and ad impressions) in the mobile space. Case in point: although I got a kick out of the awkward visuals the iStage-fueled app for The Spirit produced, I didn’t exactly rush out to see the movie. And I wasn’t alone.

Big Stage was founded in 2007 and has 20 employees. It has raised $10.6 million to date from Mission Ventures, Selby Ventures and Tech Coast Angels. Rivals include Oddcast and Jibjab.