A look at WritingPad
As of now WritingPad is unavailable from the App Store, but before it disappeared I had a chance to install it and test it out. Bottom line? The "guessing" it does worked surprisingly well, but a few glitches (like trying to add a question mark, which you'll see near the end of the video) marred the intelligence of the autocorrection.
The results of pitting the standard input versus WritingPad, however, weren't great. I found that if I trust Apple's built-in keyboard and autocorrect, my typing is faster. Plus, by smearing your finger around the screen the hand you're holding the iPhone with can get fatigued. I tend to either one-finger type or use both thumbs delicately perched above the keyboard. Also, you have to think a bit more when typing with WritingPad, which sometimes messed me up as I "spelled" the words with my finger. You may type by pressing one letter at a time, however. Guesses appear three at a time below the text entry area. Moving the cursor around is harder because it doesn't magnify the screen as Apple does (so you guess a bit). When you do finish typing you can email the text to yourself or save it inside the app.
WritingPad is a very nice tech demo, but I don't see it usurping Apple's virtual keyboard entry method any time soon. Perhaps a larger screen using similar technology makes sense?
UPDATE: WritingPad is back in the store. (iTunes link)