It doesn't really pay for itself but here are some good uses I've found (after being vehemently anti-iPhone):
1) For the geographically challenged - Navigation. Walking around NYC for 2.5 weeks unsupervised, the iPhone's Google maps function + free subway map were invaluable tools. Kept me from looking like a tourist rube, got me home safely, and I didn't have to nag friends for directions everywhere.
2) For the chronically lazy - email. I can check my email without getting out of bed. That may or may not be a plus.
3) For school - tools. The HP 12C calculator was not only a pain to find, it was pricing out at $120. The HP12C app cost $14.99.
4) For the Heroes + coupon fan - Yowza! You can search for local coupons on this free App.
5) For the hungry - Urbanspoon. This free app, while not perfect, can give you a quick and easy overview of local restaurants, organized by price ranges, cuisine, and neighborhood. And it's organized like a slot machine, so that's fun, too.
None of these pay for the iPhone, but they're useful enough to sort of justify the increased cost. A little. Oh, I know the Android has a program where you can scan UPCs and run a price comparison online. A friend has used it to get pricematched electronics. I haven't checked but there may very well be an app for that on the iPhone, too.
If I ever figure out a way for it to generate revenue, I'll let you know!