You do not necessarily need an expensive DSLR or point-and-shoot to take great photographs. In fact, I personally think the best camera you have is the one that is on you. For a lot of people, for most people that is their cell phone, their iPhone, their Droid or whatever. The reason that it is such a great camera is because it is always in your pocket, you can always use it and you can always bust it out.
What is important to remember are the limitations of a camera like this. There are things you are not going to be able to do. There are size limitations. But despite that, it is a great photographic tool, it is a great tool to practice your craft, that way if you understand the basics of composition shooting with your iPhone, I personally have my own iPhone photography blog; it is thelondonbroil.tumblr.com. I post things that I see like this. Things that follow my thoughts on what I think is good composition.
It is also important to remember that the iPhone has a couple of different options for shooting, specifically you can shoot in HDR mode, (?) mode or flash photography mode. This image here was shot in HDR mode and the reason that this worked well was because there was a lot of different exposures in this image so I used the HDR to bring out the glow in the buildings and the sky at the same time. Just like any other HDR, you want to keep it as steady as possible when doing it. This one I balanced on a garbage can to get it to look right.
Despite that though, I will also shoot with my iPhone and edit it like a traditional photo. This is an example as well. This was shot at an Andrew W.K. concert. Knowing the limitations of the camera really helps. The way I shot this image, I was going for sort of a shutter drag look was I focused it over in a dark area of the photo to blow out the highlights, had the flash on, brought the artist and the crowd into focus and kind of got a little bit of a shutter drag doing so. It is basically a way of tricking the camera into giving it a longer exposure, again, by focusing over here on the black area and then moving it into frame as the shutter is opening that I was able to achieve this effect.
iPhone photography is great. Instagram is very, very popular. I personally like to edit using Photoshop Express, which is a free program that you can download. It is a really, really stripped down version of Photoshop. A lot of times you will find with Instagram that photos that look great look great not because they are great photos but because they are great filters and I think in a lot of ways it waters down what is good photography, which is not to say that there is not great Instagram photography out there as well.
Again, the best camera you have is the one on you and in a lot of cases that is the iPhone. Do not 'poo poo' it as a real photographic tool.