I recently got the "Brushes" App for my iPhone and I've been really enjoying it. For those times when I don't have a sketchbook but I do have my iPhone it's a great alternative.
Anyone who's used Photoshop will be comfortable with it immediately. The color selection tool is just like Photoshop: is easy to use and basically you can pick any color you can think of. The brush choices are limited, and you can only use four layers at a time, but I actually like both of these limitations. It keeps your choices from being too many or too overwhelming. And the layers aren't as limited as they seem; you can "merge down" a layer onto the one beneath it, so you can keep adding layers, getting them how you want them, merging them down and then adding another. Also the size of your iPhone screen is another limitation - you can zoom in for detail work, but overall, you can't get too complicated with it, which forces you to keep it simple.
Portrait of my daughter - my first Brushes effort.
For those of you that have never used Photoshop (and therefore the previous sentence makes no sense to you), Brushes could actually serve as a good introduction to how Photoshop works, because it's got such limited choices.
On the homepage for the App there is a good pdf that you can download and read up on how to use all the tools. Also there are videos showing how it works.
I find the size perfect for doing portraits. Don't ask me why, but I started a series of animals smoking.
Brushes is $4.99. If you go to flickr.com and do a search for "Brushes" you will find a lot of other examples of what people have done with the App.
There are other Apps for drawing and painting - like Sketchbook Mobile and Inkling - which are cheaper (Sketchbook Mobile is $2.99 and Inkling is just $1.99). If you've used any of these, please let us know in the comments which you prefer, and why!