I've written about Drawing Pad for the iPad before and it's great for kids, but for the serious artist, check out ArtRage. ArtRage is almost like Adobe Photoshop or Illustrator in the sophistication, yet they are able to accomplish this with an elegant iPad interface.
In the hands of a true artist, ArtRage can create finished works of art that rival an oil painting. A simulated form of Pressure sensitivity and an assortment of tools determines how much "ink" to leave on the canvas. At CES, an artist "painted" a model using the app and you can see the results.