While everyone waits for Apple to implement copy and paste on the iPhone (or hacks their own), Newton users have been enjoying it for 15 years.
Here's a great video of the just how Apple pulled it off on a previous touch device. Clicking and dragging selects the text, and moving it to the side of the screen sends it to the clipboard, represented by a shortcut. You can then move multiple copies out of the clipboard and into your applications with a drag of that shortcut.
It seems like a variation of this could work for the iPhone -- drag text to an edge or corner as a clipboard. Of course, there's a lot less text manipulation on the iPhone than the Newton, which was a PDA.
Either way, I still love my Newton. Sure, people make fun of me for carrying around a PDA the size of a baby dolphin, but I don't care. At least I have copy and paste.