New York Times has a list of best iPhone apps of 2011. One only photography iPhone app made the list.
The introduction in the NYT article sums it up really well.
This extremely cool panorama technology from Microsoft is highly refined and a breeze to use. Stand in place and point the phone’s camera straight ahead, and Photosynth (free) snaps a picture. It then prompts you to drift in different directions and to stop when it detects the next photo in the panorama sequence. The app takes a minute or two to process the shot, but when it’s done, you have an amazing photo that you can rotate in any direction, enlarge and share as you would any iPhone image.
[Update]: I had a walk later in a local park and took the following Photosynth using my iPhone 4S.
It is pretty cool. For people with strict quality standard, Photosynth may not be for you. If you look closely you can see two major imperfections: uneven exposure and discontinuous objects.
The following is the flattened view of the Photosynth.
The following screenshot shows you how the individual images were stitched together.