The iPhone app had support for all the same features of the desktop version: TTS, annotation, text reflow mode. It also had a zoom feature I hadn't seen before. You can swipe to turn the page, of course, but if you tap the right side of the screen the app will jump to a piece of text and zoom in. Tap again, and it will jump to the next piece of text.
I don't know that this would win me over from text (but then again, I like text). But the Blio iPhone app is probably going to be the best reading app for its rich format. The only reading apps (that I'm familiar with) which might handle similarly rich content are focused on textbooks, and I don't think they are as good.
In other news, Blio have a new business partner. Toshiba are going to open their own ebookstore based on Blio called Toshiba Book Place. The site's up in case you want to check it out. You know, now that I know about this partnership, Toshiba's new dual screen netbook makes a lot more sense. Toshiba call it an ereader because they expect to run Blio on it.
P.S. I know someone's going to be thinking about books as apps, especially on the iPad. Yes the book apps have rich content, but they're locked into the one platform. Blio's ebooks will be usable across multiple platforms.