In the "Expenses" tab you can add, edit, or annotate your expenses. When you add an expense, you can select a category and enter an amount. You can choose between 10 categories including: general, food, electronics personal, and groceries. When you enter an amount and save the expense, it is automatically deducted from the budget and the "fuel gauge" moves towards the "empty" line on the month screen.
Overall, this is a very nicely designed application that offers a handy solution for managing your budget on-the-go. However, it would be nice to have a desktop application on the Mac that this app could sync with. Perhaps via a WiFi link, like 1Password for iPhone -- maybe it could connect with ChaChing? Still, for $2.99, this application is definitely worth the price. Pennies (iTunes Link) is available right now via the App Store.