The iPhone is a competent little field audio recorder. Since it can make CD-quality, 44.1 mhz, 16-bit recordings, it rivals the dedicated stereo field recorders in the under $500 price range.
The built-in mike is not up to the task of making professional recordings, but the Blue Mikey is. This $80 attachment is the best quality snap-in mike available for the iPhone. It has the largest condensers for it's size, allowing a nicer bass response for good, flat recordings.The built-in mike is fine for recording audio notes and lectures, but where the Mikey excels is in making professional recordings of voice and music. The three-position input switch covers must audio recording situations, with the lowest setting just made for recording live performances. Expect to hear a lot of bootlegs recorded with Mikey in the future, since it's small enough to pass through security and remain inconspicuous while recording. Check out Derek Helmer's U2 recording. The Mikey's 5-position swivel head allows for a lot of positioning flexibility.
There's not a lot that's bad about the Mikey. It's biggest issues are that it doesn't fit snugly into the port of the iPhone, has little stereo separation (a weakness when recording sound effects) and no line input (the TuneTalk and iVoicePro both offer this.) But I think once you hear the quality of recordings, these won't annoy most.
I have been using the Mikey with the 4-track stereo RecordStudioPro app on my iPhone for recording professional demos, voiceovers and percussion loops. The Mikey can be can be placed 6 inches away from an amp at practice volume or can record a chorus in a cathedral. The two give the musician and producer a lot of flexibility to make CD-quality recordings anywhere with a minimum of fuss.
Tip: One issue with the mike attachments for the iPhone is that playback comes through the speaker, not through the headphones. This is especially annoying with multitrack recording apps. You can start playback, unplug the headphones and plug them back in to route the audio through the headphones, but it's a pain to do each time. For playback I find it easier to instead record to an empty track and mute it. If a track is being recorded, your iPhone will play through the headphones.
