Super Monkey Ball is brilliant and quite cheap now, Asphalt 4 is quite fun, Ferrari GT Evolution is good but I regret buying it, Virtual Pool is great fun, as is TapDefense, TapTapRevenge is also very fun, and so is Tap Tap Dance. There are a lot of great apps, I'll list my favourite ones:
Tap Tap Revenge - FREE (Like DDR, tap to the beat of the songs)
Tap Tap Dance - £2.99 (Like TTR with more Dance music, multi-touch and a lot harder)
Tap Tap Revenge NIN Edition - £2.99 (TTR with loads of NIN songs, more for collectors)
Asphalt 4 - £5.99 (Racing game with over 30 cars)
Koi Pond - £0.59p (Very fun multi-touch Koi Pond-simulation game)
Cube Runner - FREE (Guide the arrow through many 3D levels without hitting the blocks)
Cast Catcher - £2.99 (Internet radio wherever there's a connection)
Air Sharing - £3.99 (Turns your iPod/iPhone into a Wi-fi HDD, very useful for holding and viewing documents, it's like a USB Pen in your iPod/iPhone)
PocketGuitar - £0.59p (A very good guitar simulator with many different instruments and effects, and you can actually play songs on it if you can play guitar)
eBay - FREE (Very useful eBay app, a lot better for navigating eBay without the need of going on the site in Safari)
TapDefense - FREE (Stop the enemies getting through the winding path and into your base by building weapons and defenses against them)
BurningTires - £1.59 (A fun racing game with arcade physics and good 3D graphics)
Flashlight - FREE (A very useful flashlight supporting every colour and many different animations)
fring - FREE (VoIP, Skype and every IM client in one)
Tunnel - FREE (Guide your arrow through the cave path)
Darts - FREE (A good, free Darts game)
Zippo Lighter - FREE (Quite fun, simulates a Zippo Lighter, good graphics)
aMailTyper - £0.59p (Type your E-mails with a sideways QWERTY keyboard for easier typing)
Night Stand - FREE (A nice LED display displaying the time, leave it on with the iPod/iPhone on charge for a nice night light)
A Free Level - FREE (A level to show you how straight surfaces are using the accelerometer on the iPod/iPhone, very useful)
Hope that helps, there's over 10,000 apps on the App Store, it's quite hard to find good ones ;).