Why does my phone heat up??

if i watch a movie on my phone streaming directly from youtube, my phone tremendously heats up within half an hour. It heats up almost as much as my laptop does while playing microsoft flight simulator x. The laptop has its fans and cooling systems, the phone doesn't, and i'm concerned here.
Is this a safety hazard? Will the phone catch fire if i keep watching movies for more than one hour? And won't this ruin my battery? I thought lithium batteries go bad if operated at high temperatures for extended periods. Please suggest. Shall i stop using my phone for watching youtube? It's a bit annoying having to power up the laptop and wait for minutes till it boots and gets ready, the phone is always alive, i don't switch it off, and youtube is just seconds away. really don't want to turn my laptop on for such basic stuff. That's the reason i purchased this smartphone, if i knew this before, i would have chosen a cheaper nokia than this nokia E7-00. Disappointed.

i've already had the USB connector broken once. The phone was still under warranty but nokia care refused free service claiming physical damage is treated as user abuse induced and not covered in the warranty. Showed them these forum threads, and the lady said she doesn't have official instructions from nokia about this being a design problem and she cannot repair it for free.. Now I cannot just throw away such an expensive device, m not that rich.. and I paid on my own to get it repaired
Interesting observation bbao. I don't play games on my phone or run other cpu intensive tasks on it. The things i use on my E7 are phone calls, sms, email, whatsapp, and the browser for watching youtube and other casual web surfing. I don't mind my phone not being able to cope with super cpu intensive tasks, i have a HP ELITEBOOK laptop with a core i5, dedicated discrete graphics acceleration, and 8GB of RAM for those and i don't expect a small mobile phone to perform like a 17 inch windows 7 laptop. But youtube, is so basic these days. Cheap asha phones play youtube, so why won't my once-flagship E7 do?
I'm a nokia fan for life, if u have read my pilot post here, u'd see i never said i would purchase a samsung, i would not, nothing beats nokia designing, but if i knew this was coming, i would buy a cheaper nokia phone, maybe an entry level asha, not the E7. When someone purchases a device like this, i guess it's reasonable to expect his device to do basic stuff like emails, web browsing, facebook and youtube. I don't want to run Oracle or MS SQL server on my phone, that's unreasonable. But youtube? Come on, it's such a basic thing these days, every phone can play youtube..
indeed i do keep my charger plugged in while i watch movies, or else if an emergency shows up and i need to leave right then, i wouldn't have a fullly charged device.. But within a while the charging LED shuts off, nokia battery monitor app says the battery is 100% charged, and then if i don't unplug the charger, my battery stays at 100% even after an hour of intense youtube. I do the same on my laptop too, don't unplug it after it's charged, i keep it plugged in, Windows7 throws a message saying 'Battery 100%, battery health 100%, charge:0.0, terminal voltage some 12 decimal something, battery health: excellent, plugged in, NOT CHARGING.'
so apparently, my laptop figures out when the battery is full, and cuts it out of the circuit to draw power directly from the wall. Doesn't my phone do the same? Doesn't it stop messing with the battery once it's fully charged? Do you think this overheating is harmful for the phone on the long run? Do u suggest i should unplug the charger, let the battery drain, charge it up again, and unplug when it's done charging? Won't this reduce battery life by dramatically increasing those 'cycle count' numbers?? Ironically, my laptop doesn't have this problem at all. The temperature doesn't rise much even if i keep streaming youtube for 3 hours. But this phone, it heats up so much that it's uncomfortable to even hold it, it almost burns my hands.
NOTE TO NOKIA:- your products are the best, but your 'nokia care' is the worst ever tech support service i've come across. Go to the apple genius bar, the engineers make you feel special and try their best to actually resolve the problem. Go to a nokia care point, the engineers act as if they are doing me a favor and i should be greatful to them.

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