The reason for this is that the iPhone defaults to route audio to the "receiver" speaker (the one by your ear) rather than the built-in speaker at the bottom when you also have input enabled (as with two way chat in games). iPad doesn't have a "receiver" speaker, so it just goes to the built in speaker.
You can override this default using the AudioSession API. Do this right after you set the session category to PlayAndRecord:
UInt32 audioRouteOverride = kAudioSessionOverrideAudioRoute_Speaker;
AudioSessionSetProperty(kAudioSessionProperty_OverrideAudioRoute, sizeof(audioRouteOverride), &audioRouteOverride);
A word of warning though – playing the chat out the speaker will lead to some feedback since the audio coming out the speaker will be picked up by the microphone. Best to use headphones with built in mic for this kind of thing...