I just picked up this Griffin device for using the iPhone with regular headphones since the headphone jack on the iPhone is recessed slightly.  It also comes with a dual output splitter with independant volume controls so you can share the audio with a friend.
Both adapters can fit into the iPhone fine, so you get two devices for the price of one basically.
I tested it with my Sennheiser HD-280 headphones and the iPhone sounds amazing.
I picked mine up from the Griffin online store for $14.99 with free shipping.  They also carry these in the Apple store I think.