Here's how to use the RJDJ iPhone app. You install the app, plug your headphones in, launch it, and press "Now Playing". A song plays, the app starts to sample the sounds in your environment, and those sounds are remixed in real time and played back to you. It might be the coolest thing ever. Check out this video and this other video for a quick look at how RJDJ works. The first video shows some songs that use the iPhone's accelerometer to modify and scratch the beat. (via waxy)
PS. It might only be the coolest app in theory...it's also flaky as hell. It was working fine for me and then crapped out...there's no music now, only sound sampling and it's really quiet. Maybe you need to use the Apple headphones with the mic?