Nescaline (NES Emulator in the App Store)
Update: Nescaline has been pulled from the App Store. No official word from the developer about the situation, although this was expected.
Emulation is not allowed through Apple's App Store; but today a Nintendo Entertainment System emulator called Nescaline [App Store] has appeared on the App Store. Released by Jonathan Zdziarski, Nescaline comes with a handful of free games but actually allows you to load up your own NES ROMs (directly violating Apple's strict 'no foreign code' policy). The download costs $6.99, but more importantly it might be available only temporarily (Apple has been known to remove downloads after further review).
The controls use the multi-touch surface of the iPhone, which makes quick-move games difficult (Battletoads, Mario, and Tetris are a bit more difficult). Surprisingly, the Legend of Zelda has proven to be quite enjoyable after about five minutes adjusting to the new controls.
Rotating the device will also rotate the allowing for a slightly larger view in portrait mode. Sound appears to have some problems, and various graphical glitches appear occasionally. Overall, if you're looking for the first available true emulator on the iPhone (including the ability to load ROMs) this is it. Discuss this in the forum.