Pastebot: You know how Microsoft Office's clipboard lets you keep track of everything you've copied and pasted on your PC? This is like that, for the iPhone. Except flashier, and with wireless syncing. Two dollars.
"When you know a ratio, you don't know a recipe, you know 1,000." Ruhlman's upcoming Ratio iPhone app looks like an excellent way to spread his theory of ratio-based cookery. Scared of sauce-making or baking? This is for you.
Bing: More than just a search app, Bing replaces a lot of the Google-based services on your iPhone, including maps. Assuming you like Bing, it's very good; assuming you don't really care what you search with, it's still worth the free download.
Dragon Dictation/Search: Shocking accurate dictation software, based on the best-in-the-industry speech recognition engine. Dragon Dictation lets you copy and paste the resulting text to any other app, why Dragon Search sends your words straight to the internet, like a slightly more perceptive and flexible version of Google Voice Search.
Gorilla Cam: A shot timer, time lapse, rapid-shot mode and a bubble level: these are the things that you'd normally find in a paid camera app, but that you'll find for free in GorillaCam, presumably because it's good advertising for the company's flexible tripods, which you absolutely do not need to use it.
N.O.V.A: I was skeptical of this one, since it's $7 and iPhone FPSes are reliably terrible, and this one looked, at first glance, like a Halo ripoff. Well! Controls still rely heavily on touch overlays, but you know what? It works pretty well here. The graphics are borderline unbelievable, the app runs well, the multiplayer modes are actually good, and there's enough pure game here to last quite a few hours. This isn't just a great iPhone game, it's a milestone for the platform.
String Trio: Fake-play a violin, viola or cello by emulating bow strokes. With a large song selection and surprisingly precise movement recognition, this is part rhythm game, part learning tool. It's basically a theory-literate air guitar for the orchestra kids
Autostitch: There are free panorama apps out there, and some of them work fairly well. This, though, is in a whole different category: you can stitch up to 20 photos together, for 20 megapixel panoramas. 20 megapixels. On an iPhone. High-res support is limited to the 3GS, but still. Two dollars.
Ustream: Live video broadcasting from your iPhone, including from the 3G. Since it'll upload straight to Ustream, it's actually a serviceable, albeit web-based, substitute for a proper video recording app. Which reminds me: Why isn't there an official, proper video recording app for older iPhones? It's clearly possible, and this app, unlike Cycorder and the like, actually got approved. Anyway, free.
Vonage: If you're already a Vonage customer, you can use this app to make calls over Wi-Fi, or route your international calls through their VoIP service using your regular minutes. This sounds a lot like what Google Voice does, the difference being that Vonage hasn't been sequestered in app approval purgatory, for whatever reason. Free.