You might be asking yourself how this is helpful since the iPhone comes with an official YouTube application. The answer to that is that Cooliris' presentation is slightly more appealing. Where the official YouTube app forces you to scroll down a long list, with Cooliris you can simply rock your phone back and forth an endless array of thumbnails until you find something you like. Videos play back in a YouTube window, then you're brought back to the search results. It's smooth and it works well.
Cooliris has also managed to fix one of my big qualms with the earlier version, which would not let you save images from the image search results. With the new version there's now an option to save the full resolution version (not just a screenshot) with one button. The picture goes straight to your camera roll and you can keep on using the application. Again, this is a drastically better system than having to snap a screenshot.
The mobile application continues to be a shell of its desktop self, which integrates with a wide range of sites, and can be programmed to work with your own blog or Web site. While Apple's SDK won't allow such deep integration with other iPhone applications, Cooliris continues to pack in more sites and sources into this one.
Cooliris is free and can be found on the App Store (iTunes link). If you've already got it installed, and the 1.2 update isn't showing up, just delete the app from your phone and re-download it.