As far as I can tell, there are only (2) ssh apps for the iPhone right now: Touch Term ($2.99) and pTerm ($4.99). Since I don't know anyone who has tried either, I decided to download both and kick the tires.
Besides basic terminal support, I want an ssh client that allows you to configure ssh tunnels. Since Safari on the iPhone supports proxies, there's no reason ssh shouldn't be able to listen on a port and redirect to a remote host (-D) so I can tunnel my http traffic when I'm someplace sketchy (or someplace I don't want to be snooped, like work).
First, Touch Term:
Touch Term requires you to specify your username and password in the connect screen, which (1) makes me paranoid that my user and password are being shipped back to the author, and (2) makes you setup multiple connect profiles for multiple users on the same box.
Touch Term eats the initial ssh connect dialog, so you don't get to initially accept the host as known or not. I was not able to test with either client what happens if the host signature changes (man in the middle attack).
Touch Term also does not support ssh tunnels. It does let you hide the keyboard, and does support horizontal and vertical, but does not support multi-touch to zoom in and out.
As for pTerm:
pTerm requires you to setup a connection first, but asks for username and password at login. The initial connect dialog tells you that the host is unknown, and do you want to accept the key.
pTerm does not let you hide the keyboard: you get about 1" viewable, or 6 lines. You can use multi-touch to pinch/pull/scroll, but whatever text you have can only be viewed in that 1" area. It also supports both horizontal and vertical viewing.
pTerm does not support ssh tunnels, but I did submit a feature request. Since it's based on putty, I hope that feature can be ported pretty quickly.
Both apps have their strengths and weaknesses, but neither supports everything I'm looking for. I'll have to wait and see what the next few updates bring, or just roll my own.