I've been trying out the (free) Photosynth iPhone app.
Basically, you pan slowly around, and the app takes overlapping pictures, which it tracks onto the scene in real time. Then it stitches and blends them all together into a rotatable (and tiltable!) panorama.
The auto tracking is pretty amazing, and the stitching is usually pretty smooth.
If you get good, even lighting conditions the end result can be pretty amazing.
Unfortunately, you need to have Microsoft Silverlight installed to get it to work.