Pleco's OCR feature for the iPhone is just out. I used it to create flash cards for all the vocabulary from my current Chinese textbook (Contemporary Chinese, vol. 3) in just a little while. Then I exported the flash card list as a text file and pasted it into Skritter (in three sections because there were too many words.)
I bought a used iPhone 3GS to use like an iPod Touch (i.e. with no phone service) to use with Pleco (particularly for the OCR feature). The new iPod touch has an inferior camera (no autofocus) so it won't work for OCR. I found that the 3GS works, but it's best to use something like the Griffin Clarifi case, which has a built-in magnifying lens you can slide back and forth, the camera with or without it. The magnifying lens improves the speed of character recognition and makes holding the phone less of a jittery proposition.
OCR is a very cool feature in Pleco!