I've been slowly wading into App Store development recently, and while I've found Apple to be extremely supportive developers on the Mac, it hasn't released any development tools for iOS ("Xcode for iPad" is one of those mythical creatures that developers will tell you they want only after a couple rounds of drinks). This realization drew me to Codify, now named Codea, an iPad app that allows developers to write and even run XML code on the iPad.
Unfortunately, the biggest drawback with Codea was that you couldn't run that code anywhere else. The best you could do was copy the code out and then put it into some other development environment. But that gap is being narrowed. The developers of Codea have released an App Store game called Cargo-Bot, which is a title fully developed inside the Codea app on the iPad.
The app is free, and it's just a proof of concept at this point (but it does have some nice features, including 36 levels, and even a way to upload solutions to YouTube). But the devs also say they're planning to release the framework they used in Xcode on the Mac. Once that happens, other devs will be able to code on the iPad, download that code to the Mac, put it into Xcode, and then make full-fledged iOS apps written right there on Apple's tablet.