In addition to the games already mentioned, I can recommend iShoot and GalCon.
iShoot is a tank artillery game that pretty much replicates Scorched Earth on the iPhone. It has loads of weapons, great customization options (design your own weapons, for example) and multiplayer over a local WLAN.
http://www.ethannicholas.com/iShoot/
GalCon is a real time strategy where you take over planets and annihilate your enemy. It has five different single player game modes with ten different levels of difficulty and online (via 3G and WiFi) multiplayer with up to 4 players. The new version adds 2 vs. 2 multiplayer mode, but I haven't tried that out yet so I don't know how it works. The game is quite simple and easy to learn but requires skill and quick thinking. And it uses the touch controls just right.
http://www.galcon.com/iphone/
