iShred, an iPhone guitar app that makes playing real songs possible
iShred from Frontier Design is yet another guitar simulator for the iPhone, this time with an eye towards electrics, complete with stomp boxes and pedal effects. Unlike a lot of the other guitar apps out there, though, iShred looks fairly practical to use as a real instrument, allowing you to assign up to 10 chords to buttons at the top of the screen, leaving your other hand free to pick or strum. It's the only practical way to do it—as cute as it may be to try to play chords on a virtual fret board, it's nearly impossible to do so with any accuracy on the iPhone's wide touch screen.
iShred is $5 on the App Store and has impeccable ratings.

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As an update to the story iShred 1.3 is now for sale in the App Store (free upgrade to existing users).
The biggest new feature is AirPlay. AirPlay lets you share your song performances with all of the other iShred (and Guitar) users around the world.
It's fun tuning into AirPlay and listening for new songs. If you like a song it's just a button click to add it to your playlist. Great way to expand your song library, get new effect arrangements, and getting the song performance to learn from.
-Jerry