Whiteboard Collaborative Drawing is a free app that turns your iPhone or iPod Touch's screen into a small, shared drawing space, like a whiteboard or sketchpad. The simple touch-screen interface lets you choose the width of your "marker" (from a fine, pencil-like point to a wide spray-paint-style brush), with six different colors plus an eraser. You just tap on the screen to begin drawing, and you tap with two fingers to bring back the settings screen.
Whiteboard Collaborative Drawing becomes even more useful over Wi-Fi, as users on two different devices on the same network can draw on a shared whiteboard in real time, whether you're collaboratively brainstorming or just playing tic-tac-toe. You can save drawings using the iPhone and iPod Touch's built-in screenshot capability (i.e., by just pressing the home and sleep buttons simultaneously).
There are some obvious areas for improvement--for example, being able to draw on an existing image, or to share a whiteboard over the Internet--but overall, Whiteboard Collaborative Drawing offers a lot of useful functionality for a free app.