Something tells me kids and college students are going to love this one. Submerged is not a "useful" app like your address book or even a Twitter app -- it is a toy, or novelty app. Submerged takes video from the iPhone and warps it depending upon how you shake or move the iPhone. Silly? Perhaps, but it's the sort of thing that also shows off the fancy tricks iOS can do with your phone. A few years ago this sort of thing wouldn't have even been possible on mobile hardware!
Of course, Submerged isn't just looking at the world as though it were underwater -- it can freeze those images and you can (at any time) poke and prod the image to further distort it. You can also modify pictures you've already taken. Of course you can share these images in myriad ways as well.
To see submerged in action, just check out the video below. It's actually a kind of fun (if not entirely useful) novelty app.