One of the first applications I used and enjoyed on my iPhone, Sketches, has updated to version 1.5. New in this version is the ability to change the alpha settings for colors (so you can change the opacity of the drawings you make on photos you take), and an edit mode for the corkboard view, to rearrange your drawings with. Additionally, they've moved uploaded photos off of a third-party server and onto their own page, so (for right now, anyway) no ads to get in the way. Not new in this app: a quality, fun, and surprisingly robust photo and image editor designed for the iPhone.
We've heard from the devs that there is a version 2 on the way as well, and both this version and that one are free to anyone who's purchased the app. But if you haven't picked it up yet, it is available for $4.99 over on the App Store, well worth it if you often take and share pictures with your iPhone.
Sketches updated to 1.5
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