I tried the iPhone Kindle app this morning, here's my review.

Pro:
• Syncs with my Amazon Kindle account, so books I'm reading on the Kindle are on the iPhone too, and both devices update each other about what page (I mean "location") I'm on.
• Nice splash screen.

Con:
• The text is fully justified, which results in lots of annoying giant spaces between words.
• The background is pure white, which is way too bright for comfortable reading. Compare the screenshot above with this one from Classics.
• It doesn't appear to sync newspaper or magazine subscriptions.
• Can't shop the Kindle store from within the app.
• Lags when you try to turn more than one or two pages at a time.
• Retains Amazon's ridiculous "location" numbering system, instead of page numbers.
• UI lacks any kind of iPhone polish. It couldn't be more bare-bones. Again, see Classics.

So yeah, other than the convenience of being able to pick up where you left off if you have a Kindle, it sucks, but a few well-placed improvements could go a long way.