Edit: After half day, my wife’s Mac started having the same problem. I have then applied the solution that I found in the Apple
Hidden Feature : Panorama Feature In IOS5 –
It has been rumoured for a while that Apple will be releasing a software update which will allow users to capture a panorama from with in the native camera app. It seems this feature is already in IOS but hidden and not officially released , It was found by some jail breakers earlier today. Video below shows you how to do this to your IOS device. This shows that the feature is coming in the feature but no indications when and the feature certainly needs some UI tweaks (overhaul).