Photography on the iPhone can be more than just snapping 2-megapixel pictures. You can also process and transfer the images from the same device that you used to record. For this to work reasonable well, you need a basic set of tools that allow you to edit and output the pictures. Things like cropping and image enhancement are vital. But other conveniences, such as an easy Flickr interface or means to send the image to a printer on your network are useful too. Here's a list of iPhone photography apps that I've tested with mini reviews about each. They provide a good foundation for your photo work on "the camera you always have with you."
Many people don't realize that the iPhone 3G is one of the few consumer cameras that geotags images for you. So when you upload the photos to Flickr or view them in iPhoto '09, the location information is available. If that's data you don't want to publish on Flickr, you have control over that setting in your Flickr account settings.
I've also discussed using the iPhone for photography in a couple of recent podcasts: "iPhone as Your Grab Shot Camera" - Digital Photography Podcast 168 and Podcast 21: Conversation with Derrick Story, Pro Photog and Author, About iPhone Photo Apps