First let's tackle the hot apps of the moment—those apps that can already bring you the features rumored to be in the 1.1.3 update. The major new features appear to be the faux-GPS in Google Maps, multi-recipient SMS, and re-ordering apps on the home screen. Two of the apps above have been covering those features for quite some time (Navizon for GPS and Customize for re-ordering apps), and the third, iSMS for mutli-recipient SMS, is a bit newer, but in addition to multi-recipient SMS, it offers quick-reply templates, emoticons, and a much more robust SMS management system. It does not currently offer MMS messaging, though there is an iPhone app (called SwirlyMMS) that is attempting the MMS road, though it's still a bit bumpy. MMS messages can be sent (though it requires a bit of setup), but so far not received.
The only major new feature that's been discovered in the 1.1.3 update that isn't easily available through Installer is the new web clip feature that allows the user to bookmark a web page directly on the home screen. There are hacks around that accomplish this, but they're not the kind of no-brainer installations as the above three apps. The WebSearch app described below, however, is arguably a good deal more useful for what I need than the web clips, so I can happily do without for the time being.
Now that I've covered the 1.1.3 features (I'll include in these apps in the sections below by category as well), lets move onto my twenty favorite iPhone apps.