Does an iPhone automatically process tone and color in photos?

All digital cameras not only correct tone and color, they actually create it.

Digital cameras are calibrated to sense light and produce an analog electronic signal which is converted to a digital signal with a digital to analog converter. Almost all digital cameras are calibrated to produce a signal with a linear relationship to the original scene luminance values. This is important for the capture phase of the imaging system but would make for an ugly image reproduction. Further, almost all digital sensors produce an image with only one image channel. Color is created by overlaying color filters on individual pixels and using knowledge of the filter placement to create a three channel image using subsequent image processing.

Image processing is usually done with a image signal processor (ISP). ISPs are dedicated integrated circuits (ASICs) built to apply a series of image processing algorithms to the sensor data. The pipeline of algorithms varies but usually includes steps to correct for manufacturing defects in the sensor, reduce noise, determine black levels associated with the sensor signal, white balance, apply color correction, and a tone reproduction algorithms based on the captured dynamic range and assumptions about the ultimate display medium. Finally color primary and device encoding algorithms are applied before the data is compressed and written to a file. Most of these operations are reserved for cameras that produce "output referred" image data such as that found in JPG and TIFF files, but some subset may also be applied to RAW camera data as well.

Individual camera companies often market their image processing algorithms by naming their ASICs. Names like "Digic", and "Expeed" are proprietary names for digital camera ASICs.

Long story short ... Yes automatic color and tone correction is applied to images created with an iPhone.