Anytime you're using the iPhone's iPod personality, whether you're playing music or just flipping through your lists, you can rotate the iPhone 90 degrees in either direction—so it's in landscape orientation—to turn on Cover Flow. Nothing gets oohs and ahhhs from the admiring crowd like Cover Flow.
In Cover Flow, the screen goes dark for a moment—and then it reappears, showing two-inch-tall album covers, floating on a black background. Push or flick with your fingers to make them fly and flip over in 3-D space, as though they're CDs in a record-store rack.
If you tap one (or tap the little 
button in the lower-right corner), the album flips around so you can see the "back" of it, containing a list of songs from that album. Tap a song to start playing it; tap the 
in the lower-left corner to pause. Tap the back (or the button) again to flip the album cover back to the front and continue browsing.
To turn off Cover Flow, rotate the iPhone upright again.
So what, exactly, is Cover Flow for? You could argue that it's a unique way to browse your collection, to seek inspiration in your collection without having to stare at scrolling lists of text.
But you could also argue that it's just Apple's engineers showing off.
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