There are most likely several applications for the iPhone that already do some of what this idea covers, but probably none that can pull it all together.
With all the power of the cloud/grid/global-supercomputer available via web api's, why not tap further into it with our mobile devices? I was thinking along these lines earlier in the shower, mulling over Amazon's announcement of the Hadoop/MapReduce service and... eureka!
The iPhone could use a nice optical character recognition system. But something more than just basic OCR. Most OCR systems are far from perfect. Just like most speech-recognition systems aren't perfect. But imagine, if you will, an application that combined the two. If you were able to use the phone's camera as a real-time video-feed while you read along "out loud," and pushed a stripe of the video frames, audio data, and accelerometer data (as you move the phone along while reading) to the cloud, it could feasible do a very *very* nice job of text recognition.
But why leave it at that? Since you're 70% of the way there, why not add 2D barcode processing? And since those barcodes have embedded information (and often so does text), why not give the application some convenience features while we're at it? If capturing a URL, it could offer to launch Safari, post it to Delicious, or tweet it via bit.ly. Phone number handling would be obvious. In fact any captured text snippets could be pushed to several applications on the phone (somehow?) or Web 2.0 services. Tie in geolocation and you'd have a great idea of what people are reading where, perhaps making this monetizable (if aggregated anonymously, of course).
Facial recognition might be stretching it a bit, but not a thought that's completely unreasonable. Tie it in to Facebook and wow... (business card capturing, anyone?)
So there you go code monkeys. Get to work :) And since I'd love to see something like this, consider the idea public domain (duh, it's on a blog) and All Rights Released -- although I'd it would be dandy if you'd mention me in the credits if this inspires you to go build your own.