Dragon Dictation [Free - iTunes link] brings the voice recognition and transcription technology behind Nuance's well known Dragon Naturally Speaking to the iPhone (
and iPod touch with mic attached. Apparently, per comments below, it won't allow download to iPod touch (?!) ).
Basically, you tap a button, say what you want to say -- from a brief reminder note to long, flowing prose -- and Dragon sucks it in and coverts it all to text. Nuance claims it's 5 times faster than typing, and you can email or SMS the results, and of course to update Twitter or Facebook via copy and paste. There's even a voice-controlled correction UI.
Best of all, Dragon Dictation is free for a "limited time" -- though it appears to be US-only at the moment (what, licensing problems, or don't international users speak?)
If you give it a try, let us know how you like it...