I have been hassling with getting the bit.ly bookmarklet on my iPod touch. The same problem is of course with the iPhone. I have found references which encourage to use the bookmark synchronization in iTunes. But there is another way:
- Follow this link;
- Follow the link in that page;
- Bookmark that page;
- Give it a convenient name;
- Save the bookmark;
- Edit the bookmark again and remove the beginning of the URL until and including ?___;
- Save the bookmark again and use the bookmarklet.
Tweetie is using the same trick. Have fun.