The iTunes App Store, which has been running since July 2008, has now hit 500 million application downloads. As EngadgetMobile notes, it took Apple two years to hit this milestone with music downloads from iTunes. People love applications.
If you had any doubts about the fact that the App Store is the iPhone's killer app, put them to rest. This number includes both paid and free applications, but it's definitely making some developers money (see: Trism developer).
There are over 15,000 applications available in the App Store, but none of them are Saito's Gabo, which was completed but shot down by Apple. I'm still mad about that.
Let this be a note to Google, Palm, and RIM. This is how you build a platform that's greater than just a smartphone. Sure, open source platforms are better than closed source platforms and you might have an app store... but you need apps to sell. Developers flock to the platform that will make them money.
Either way, there are a lot of great applications. What are your favorites? Mine are Tweetie (Twitter), Facebook, iTalk, Pandora, Galcon, and Scrabble.