There aren't many text expansion options for the iPhone, and none of them are perfect, but our top choice is TextExpander as it's available for everyone and has pretty decent support across iPhone applications.
- Expands text snippets on your iPhone within the app and within apps that support TextExpander (e.g. Twittelator, TwitBird Pro, Elements, Simplenote, WriteRoom, Circus Ponies Notebook, DEVONthink To Go, BusyToDo, Things and more)
- Send anything you type within the app directly to a new email, text message and tweet (in TweetBot), or easily copy anything you type to paste into another app manually
- Smart snippets allow you to insert variables like today's date and time
- Add snippets from your local Mac if you have the desktop version of TextExpander
- Sync snippets with the desktop version of TextExpander (or other iOS versions) using Dropbox
- Save notes that you type for later use
- Create snippet groups
Although TextExpander wasn't our top choice for text expansion on the Mac, it is a very solid choice and it has done everything it can to provide the best possible experience on a non-jailbroken iPhone. Because the iPhone is pretty locked down, that means TextExpander can't just magically work in every app. Apps need to come with TextExpander support. The upside is that many do, and you'll be able to use your snippets in those apps to type more quickly. Even this mobile version supports complex snippets with variables like date and time, and you can sync all your snippets back to the desktop version (or other iOS devices) using Dropbox. If you don't want to jailbreak, this is really the best option you've got.
The obvious downside -- and really the only significant downside -- is that TextExpander doesn't work with every app. When an app doesn't support it, you need to type your text within TextExpander, copy it, and then paste it into that app. In my opinion, this mostly negates the usefulness of text expansion on the iPhone, but if you're typing long notes on your device you may still find it worthwhile. Until Apple allows great access (if it ever does), however, you're stuck with only the apps that support TextExpander.
TapIt4Me, the mobile version of our top choice for text expansion on the Mac costs the same $5.49 as TextExpander but doesn't give you the iPad version as well. It has a few nice features like direct tweeting, but for the most part it just isn't as good as TextExpander. It also doesn't have the third party app support. Nonetheless, it is another option if you're looking for one.
For jailbreakers, Xpandr ($1.99) actually provides (mostly) system-wide support for text expansion snippets. This is how you want text expansion to work on the iPhone. We didn't make it our primary pick because it's a pretty simple app that doesn't come with too many features and, more importantly, not everyone is jailbroken, but if you are it's the way to go.
Lifehacker's App Directory is a new and growing directory of recommendations for the best applications and tools in a number of given categories.