Here's the lowdown: you can't apply the $100 credit directly to your iTunes account, but you can swagger into any Apple Store, or log onto the online store, and buy yourself a $100 (or less) iTunes Gift Card. The only question that remains is, what are you going to spend all that loot at iTunes?
Update: Several people in the comments, and on other blogs, wrote me to let me know that this post is just plain wrong. It is not incorrect, the iPhone credit can be used for iTunes Gifts Cards NOT iTunes electronic gift certificates. I just purchased a $25 gift card from the online Apple store using my credit.