I have had my iPhone 4 for a little over a year now , and apart from its failings as an actual phone ! , its a great bit of kit for the keen photographer. It's often said that the best camera you can have is the one you have with you and with this philosophy in mind the iPhone has been very liberating as i normally shoot with a Canon 5D which takes a reasonable amount of know-how to wrangle a decent picture out of it , the iPhone is literally point and shoot. The standard camera on board is perfectly fine but once you start delving in to the wonderful world of photography 'Apps' things get seriously interesting.
One of the fisrt app's I purchased was Hipstamatic which is described in iTunes as "The Hipstamatic for iPhone is an application that brings back the look, feel, unpredictable beauty, and fun of plastic toy cameras from the past." You get a series of lenses and films for an endless combination of outcomes and its fun trying them out to see what you can turn out.
Hipstamatic is a very good app , it gets your eye in and creative juices flowing and for several months was my app of choice. There are some more gimmicky app's like Tiny Planet which do weird and wonderful to landscapes.
To create something like this in photoshop would take me hours , this took literally seconds and is all done in the iPhone !
My current 'app du jour' is Slow Shutter and by some electronic alchemy can turn out 15 second long exposures in bright daylight perfectly - something without expensive ND filters on my 5D would be impossible . Im currently working on a series of 8 second exposures , see below so some examples. These shots have had very little external editing and are pretty much presented as they were captured by my iPhone
Plasma TV , 8 seconds
New Cross , southbound from the train , 8 seconds
Blackheath rainbow and car light trails , 8 seconds