There are quite a few programs that allow you to create panoramas on the iPhone. I've reviewed some of them, and they all get pretty good reviews. The differences are often in how much work you have to do versus letting the software do the alignments of the various images. Since iPhone photos are almost always hand held, there are going to be issues of the camera not always being level.
AutoStitch [App Store] is a US$1.99 app that gets most of the process just right. When you run it, it asks you to import images from your camera roll, as many as you like. They can be horizontal for a wide panorama, or stacked vertically. As an experiment I shot both vertically and horizontally, and rocked the camera significantly out of level by tilting it up to about 45 degrees. I took 10 images, and the software assembled the images in the proper order. There were a couple of gaps, where there was no image, but that was my fault, not the application's. The result was pretty impressive: not as a great image, but that AutoStitch could make sense out of the jumble of shots. You can see this image in the gallery I've created.
No panorama software I've seen is perfect. When I look closely at the full resolution images I see a bit of ghosting in the distant mountains, but overall AutoStitch is an excellent program that lets you take the pictures while it does the work. All panoramas need some cropping cleanup, and iPhoto can do this when you import from the camera. If you want to do all the post-processing on the iPhone itself, I suggest Photogene, [App Store] which will straighten and crop your photos, plus lots of other functions if you want them. It's a great US$2.99 investment. I'll be reviewing this app in a future post.
Here are some sample panos taken assembled with AutoStitcher. I've reduced the size of these images so they will load faster. You can find more on the developer's web site.