Skype is now available for the iPhone. Sound quality for iPhone to iPhone connections on WiFi networks is excellent, and if you leave the Skype app running (in the foreground) you can turn the phone off and still get calls. However, if Skype is not the main app, you cannot receive calls, so there are still some limitations on the usefulness of it on the iPhone. But all that is set to change in June or July, when Apple releases the next major software upgrade for the iPhone, which is supposed to include "presence," or the ability of applications like Skype to sit in the background and still run--in the case of Skype, you could be browsing the Web or sending email and still receive incoming Skype calls.
Skype support for the iPhone is a big deal. There have been some helper apps that allowed Skype calls or used another third party VoIP service, but having your Skype phone book and preferences on the iPhone is very convenient, and at least gives you the ability to make phone calls via the Internet even when not in range of an AT&T cell tower.
When the software upgrade is released this summer and presence is fully supported, it will help sell more iPhones without a cell provider service contract. For some people, just having VoIP on the iPhone will be enough.