Is Notes the only app that Apple pencil works in?

No. There are many Apps that support Scribble (that converts written letters to text). Similarly, drawing and sketching Apps (including the native Notes App) also support the Apple Pencil. The Pencil can also be used for touch input instead of using a finger.

Use Apple Pencil with your iPad - Apple Support

Connect Apple Pencil with your iPad - Apple Support

https://www.imore.com/apple-pencil-ultimate-guide

I’ve tried the method mentioned to convert pen to text but I don’t get that option in the box that appears. Just note, cut, copy or delete. Annoying