We've just released our encrypted SMS client for iPhone, SlySMS which allows sending and receiving of AES 128 bit encrypted SMS messages.
SlySMS features a simple interface and tight integration with the native SMS client (just tap the encrypted SMS to launch the app).
SlySMS is currently available for free on the App Store: http://itunes.apple.com/us/app/slysms/id418793255?mt=8&ls=1