If you're looking for a quick way to add that "miniature" effect to photos from your iPhone, TiltShift is for you.
While not as powerful as using desktop image editing software, it can quickly doctor your images to give them that tilt-shifty look, or just apply a dreamy vignette around the edges.
TiltShift comes with a library of photos to try, but you can also use photos from your iPhone or iPod touch's camera roll. If you have an iPhone, you can take a picture directly from the app.
The app works in both portrait and landscape modes, which makes it easier to transform wider photos. Rotating the screen was a little strange -- it sometimes didn't recognize when my iPod touch was rotated, and I had to sort of jiggle it to make it rotate properly.
The results are pretty good: It takes a fair bit of fiddling to get it just right, and a small screen size (and no zoom support) makes very detailed manipulation difficult. On the scale of "do you want it good, or do you want it fast," TiltShift definitely leans toward "fast." Nifty, nevertheless.
TiltShift is $1.99, and is available in the App Store.