biteSMS
 

For those of you with jailbroken iPhones, biteSMS is a nifty replacement for the native SMS app.
Some of the features that I like:
in viewing the list of messages, if you have a pic set for a contact, the pics are displayed.
Smileys are enabled in messages.
When you receive a message, there is a quick reply and you don't have to exist what ever app you are in, and with the quick reply, you don't even have to unlock the phone.
Quick compose (again not needing to exit the app you are currently in)...