I was surprised to see that Twitter for iPhone doesn't use OAuth, meaning that we'll be seeing another version before the end of June. (Note: they may be using xAuth instead, which would not necessitate an update.) The "Services" menu still shows support for Favrd, which has been gone for months, but it also includes several other useful services like Tweet Blocker, Follow Cost, Favstar.fm, Overlapr, and Tweeteorites.
A few noticeable changes in your timeline include inline retweets and location information (where available). If you are not logged in you can see trending topics (although why you would want to see trending topics is another question entirely) and search. There is also support for "Top Tweets" and "Suggested Users," two more features of little practical value.
Read on for more features and tips.
One feature which will surely draw the ire of other Twitter developers is the ability to create a new Twitter account from within the application itself. Like Apple, Twitter seems to have decided that some things third-party developers aren't allowed to do are OK if they're done by insiders.
The biggest visible change for the average user is probably in the search panel. If you have saved searches they will be shown in the search area, and you can search for both topics and names in the same place.
Overall, this is a minor revision; it's nothing close to the difference between Tweetie 1 and Tweetie 2. But at least it's free, although Twitter is expected to start rolling out ads in the future.
Do yourself a favor and go to Settings » Advanced » Mobilizer and turn on the "Instapaper Mobilizer" -- it will reformat web pages within Twitter for better readability on the iPhone. This was possible in Tweetie 2, but setup was a little more complicated.
An iPad version is expected, but no word on when it will be released.
UPDATE: A word of warning: all of your Drafts and account information will be lost if you upgrade to Twitter for iPhone over an existing Tweetie 2 installation. Just another reason you should be using Birdhouse.