Naturally this requires a jailbroken ipod/phone:
This is seriously cool. Using my touch as a touchpad? Oh hell yes. It works really well from my playing with it. If you have a jailbroken iThing, then you need this app.
Update: I've been using this app now for a good day or so, and I absolutely love it. A lot of the apps on my ipod right now are more... gimmick then useful. They are neat to have but I don't use them very often. I've found this is actually easier to use then my full size mouse when I'm doing just some light web browsing, and with the remote mode I've got it set up to control iTunes/VLC.
For those of you that are curious, it's relatively easy to do. VLC is controllable by the keyboard so all you need is to switch to remote mode and use the 'Space' button to play/pause (Great if like me you have your computer wired to the tv in the other room).
As for iTunes, it is slightly more involved as iTunes doesn't support global hotkeys, but that is easily remedied with a third party app: iTunesControl - What I've done is set the hotkeys for next/previous song to be CTRL+left/right Arrow, so I just hit the ctrl button on the remote, and press the arrow keys. Easy!