Zac White, we might just see a version of copy and paste working on the iPhone before Apple issues an official update. Zac, who has termed his solution OpenClip, has found a way to use a small amount of shared space on the iPhone to store data and then make it available to another app.Thanks to enterprising developer
Apparently, this is within the limits of Apple's license agreements, but of course, final approval of new apps is completely in the hands of Apple.
It's important to note that OpenClip is only a framework to make copy and paste work that other developers will have to implement. It is not an application you can just install and make copy and paste work. Currently, a number of developers have pledged support, including the makers of Dial Zero, Twitterlator, and MagicPad.
The lack of copy and paste on the iPhone is definitely holding back a lot of functionality. While it would be easy to write a simple word-processor or blogging tool for the iPhone (and some have done so), they will only really become useful once you can copy a URL from Safari into the Wordpress or Typepad editor or a piece of text from Safari into a notepad application.
What Will Apple Do?
OpenClip is mostly a band-aid right now. Apple will release copy and paste sooner or later and given that Apple's own applications like Safari aren't very likely to support OpenClip very soon, the current solution will remain of limited use, but at least it will show the potential and give application developers an idea for what they will be able to do once this becomes a standard feature (and yes - it really should have been a standard feature of the first iPhone firmware...).
Here is a video of OpenClip in action: