While Microsoft hasn't yet announced an Xbox Live iPhone app of its very own, it has taken a well-intentioned step towards validating the handful of apps currently available on the service: it's required that the developers make their apps free. Now, before you go off about mean ol' Microsoft keeping the independent developer down, consider the reasoning here: these developers are given access to the Live functionality through the Xbox Community Developer Program and, as such, are beholden to Microsoft's rules.
In this case, Microsoft evidently has no problem with the applications themselves, just with developers charging cash money for them, so it's really looking out for you here. If you've held off on trying one out, we've included links to the three we could find (one isn't free yet, but we expect it will be shortly). Take 'em for a spin around the 'net and report your findings back here.
Source – 1337pwn XBOX Live Friends List AppStore Application is now FREE
iTunes – 1337pwn (now free)
iTunes – iLive (still $1.99)
iTunes – Xbox LIVE Friends (formerly iXboxLive; now free)