On Monday, Amazon.com put out a small tweak to iTunes link) that takes users to an iPhone-optimized store when they click on the "get books" button.(
There's now a page that lets users search either by title, author, keyword, or category. It also lists some of the New York Times best sellers, and items that have been recommended based on past purchases and browsing habits. Previously it would simply offer up a link to the desktop version of Amazon's Kindle Web store, which required a whole lot of pinching and zooming around to find what you were looking for.
Despite the change, the application still kicks users out to the Safari application instead of implementing the browsing experience within the Kindle app itself. It's safe to assume this will change in the next iteration, since in late April, which includes a built-in catalog of books that users can purchase.
There's also the soon-to-be-released iPhone 3.0 OS update, which will allow developers to add in-app micropayments--something that's perfect for eBooks. As it stands you still need to handle that end of the transaction on Amazon's site, instead of on the Kindle app.