For me personally, these are the essentials in creating music on my iPhone:
ThumbJam - VERY EASY to make awesome stuff in this, comfortable learning curve
Dopplerpad - has some depth in terms of creating your own fx/synths, looks awesome, great for creating electronic-sounding bits
Beatmaker - hard learning curve if you wanna use it properly but it ROCKS and is the centerpiece of how I do all my work, I copy/paste ThumbJam & Dopplerpad stuff in here
Filtatron - came out recently, was the missing piece in my arsenal to really manipulate sounds and make them sound organic, warm, distorted and fucked up
Example of something I made using mainly Beatmaker/Dopplerpad/ThumbJam (without using a pc or anything else):
http://soundcloud.com/reese015/daylight