Its a woodwind instrument (for lack of a better word) for the iPhone. You blow into the microphone to create sounds and use four buttons on the screen to get various tones. It works way better than you'd think.
That by itself is pretty cool, but it doesn't stop there. It also sends you musical creations out to the net and if you want to and you can actually listen to other people play anywhere on the globe in (semi?) realtime! It even has some cool visualisations for that to boot.
Wow...the iPhone app-store has only been around for 5 months or so and the creativity continues to amaze me.