Those waxing nostalgic for Apple's Newton can take comfort in a new unofficial third-party application for the iPhone that can recognize handwriting (fingerwriting?) and turn it into typed text. Dubbed "HWPen," (and described in this "modmyifone" thread) the application was developed by Hanwang.com.cn to allow Chinese character input on the iPhone, but the program works equally well with English input.
In order to install thie HWPen, follow our guide for enabling third-party apps on the iPhone, then use Installer.app to add the source: iphonecake.com/src/all.
To add a source (as also described in our guide), tap "Sources," button, then tap "Edit" in the upper-right corner, and finally "Add" in the upper-left corner. Enter the URL of the source you would like to add and press "OK." Installer.app will add the source, and you will be able to find the new application(s) in the normal "Install" menu.