Knitting Daily is among the most popular knitting communities on the Web, and this app lets you hook-in wherever you go. It includes not only blog posts from KD, but also technique videos, information on free knitting patterns, interviews with famous knitwear designers and updates from Interweave and Knitscene magazines. It's a nice way to get a craft fix without crafting.
KnitMinder Lite is kind of like a personal organiser for all your knitting and crochet bits and pieces. You can keep track of your projects and enter notes on a progress report, use it as a row counter, keep a list of patterns, document your yarn stash and list your needles and hooks for quick reference (handy at the yarn store if you can't remember what you have).
Actually, this one's pretty basic; it's just a database where you can enter your needles. It's not as comprehensive as KnitMinder's needle database, since it doesn't have any options for crochet hooks, but if all you're after is a quick reference, then Needles is a perfectly serviceable and easy-to-use app. Plus, it has a killer icon.
This isn't specifically for knitters and crocheters, but if you ever find yourself needing a measurement on-the-go, then Ruler Plus is super handy. It has one interface, with inches along one edge and centimetres along the other, with a simple plus-button that advances the ruler so that you don't have to keep adding the measurements together in your head.
Lion Brand seems to be the only free pattern app out there; it has thousands of free patterns in both knit and crochet, which you can browse and store as favourites using a free Lion Brand website registration (which you can also set up through your iPhone or Touch). You can keep notes on the patterns and also visit the website. Unfortunately, the store locator doesn't seem to work in Australia.
We've cheated a bit, here; this is actually an app for Resene paints. It'll work for yarn, too, though. If you have an iPhone, you can take a photo of your yarn and access your photo library to match the colour — but if you have an older Touch, you can also select your colour from a multi-touch zoom-able colour spectrum. The app then offers similar and complementary colours. Makes picking your project colours a lot simpler!
If you buy patterns online in electronic format, they're usually downloaded as a PDF. Stanza is a free e-reading app that also happens to support PDFs, so all you have to do is load up your files onto your iDevice in iTunes and away you go; you have your patterns in a handy, portable format that won't crinkle the pages at the bottom of your yarn bag.