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Applications for your iPhone can be separated into 4 very distinct categories.

Standard basic native applications that ship with the iPhone.

Web Applications. This is without doubt the wave of the future and the next killer application.  However a web application requires access to the internet. Whilst this is the direction of the future, the relative slowness of Verizon’s Edge network is slowing the adoption of the Web applications and driving many to look for “native” or installed applications.

Sanctioned native applications Native Third Party Applications. Recently Apple launched an SDK to allow third party developers the ability to develop applications for the iPhone. They are however well behind the curve, as many applications are available already on unlocked or jailbroken phones.

Jailbreak Applications These unofficial applications aren’t supported by Apple and require “jailbreaking” the iPhone (enabling full read/write filesystem access). They run the gamut, including some entertaining games, various dictionaries and eBooks, streaming radio tools, a voice recorder, instant messaging/IRC clients, a quasi-GPS program and more.