One of the best apps for iPhone and iPod touch is talking Carl. It's only $.99 but it's well worth the price but if you have iPod touch you need to buy a microphone for it.
I mainly concentrate on games when I shop for apps because of lack of decent WiFi or 3G service for a lot of apps that would require it. Here is what I have:
Machine V. Machine Gun $.99 - For its price its a decent game, nice and short first person defense shooter
Alive 4 Ever $2.99 - To me this one is worth the price, and is basically an zombie shooter with some RPG elements. Also its fairly long for a $3 game.
Crush the Castle $1.99 - This one I decided to finally buy after the Apps for Haiti thing started, and I don't regret it. Its more fun then the original in both controls and levels available.