ToonPAINT is the most fun I've had with a photography iPhone app in a long time. It seems like every photo app I download (which, admittedly is a lot) just takes a picture you've taken with your iPhone and turns it into something that looks like you took it with a crappy camera from the 1970s. It was fun for a while, but honestly I'm bored with it. These apps made more sense when the iPhone camera wasn't that great, but now that the camera has been vastly improved in the iPhone 4, there isn't a need anymore to make your photos look even more hip worse.
ToonPAINT on the other hand takes your image and creates
a monochrome line drawing of it, which you can then color-in. The initial image can be adjusted for the edges, black level and gray level, and sometimes you'll just want to stop there. But if you want to color your photo, you can choose colors from a standard color-picker, the colors you've already chosen, or colors from the original image. The whole thing is really well thought out and very easy to use.
Check out some of the pictures I made above - a few are from images that weren't that great as photos, but suddenly become interesting in ToonPAINT. My kids in particular got a big kick out of using the app. They have used a similar app from Lego that turns a picture into a sort of "Lego" image, but the instant cartoon you get with ToonPAINT looks much cooler.