Skype finally released their iPhone app…
The free app allows free Skype-to-Skype calls like other clients. Note that you can only make voice calls when using it over a WiFi network connection. However, you can use it to IM when on an EDGE or 3G wireless data connection.
I was a little surprised by the sound quality. It seemed to lose almost all the mid and high frequency leaving a very bass heavy sound. I also noted drops in the beginning of the call (right after answering the call).