You do not need the Kindle 2 eBook reader if you already have an Apple iPhone or iPod touch with the new Amazon Kindle App for the Apple devices.
Kindle for iPhone and iPod touch is available for free on the iTunes App store and gives you access to the over 240,000 books, including 104 of 112 New York Times Bestsellers available for Kindle.
If you actually have a Kindle and want to read your books on the go on the iPhone then Amazon has a cool feature for you. Amazon's new Whispersync technology saves and synchronizes your bookmark across your original Kindle, Kindle 2, iPhone and iPod touch, so you always have your reading with you and can always pick up where you left off.
This means you can continue to read on your commute on the iPhone where you dozed off the night before on the Kindle - neat!
More details on the Amazon Kindle for iPhone page.