so Ive tried 4 different cases for my iPhone so far, and the one I like the best by far is the Case-mate signature leather case designed exclusively for the iPhone. I picked it up at my local AT&T store. The reason I like it is its still thin enough for your pocket, it looks like it would REALLY protect the phone in case of an accidental drop, it has an optional belt clip (sticks out from your belt a little too far, but still, better then others), it comes with a very good screen protector (unfortunately it has mild adhesive on it, i removed it and there was NO residue) and it works great with the touchscreen. The edges around the screen are slightly raised, meaning that any drop onto a flat surface will NOT hit the screen any way possible. Its durable, classy looking, and the iPhone doesnt try to jump out of your hand when holding it (ok Apple, dont you think instead of making a nice, slick, smooth device, perhaps put ridges or rubber on it for better grip? I mean really, holding the iphone without a case is like trying to hold an ice cube with your hand wrapped in plastic wrap).
As far as the others Ive tried, I used the suggestion to use the cloth carry case that comes with the 5G iPods, and while it fits, its not snug and slides out too easy. I got the rubber one with the headset holder on the back.. too bulky and I dont always need the headset holder. Made it rough to fit in the pocket. And then I got the regular leather pouch. Holds it nicely, but getting it out (and in without hitting buttons) is a pain and I feel like I might damage the iPhone from all the pushing on it to get it out of the case.
So, the case-mate Signature Leather Case as seen here
http://www.iprong.com/article.php?id=2799 gets my vote so far for best case.