I reviewed Stanza, along with the other iPhone reader applications, on Teleread.
What Stanza reads is the ePub format. It can
sort of read the MobiPocket (and hence Kindle) format, but does so by converting it into ePub—and under the current version of the conversion software, loses all formatting (including bold and italics). It's an interesting reader, but I don't feel it's quite ready for prime time yet. (Now, it might not be a bad idea at all to have an ePub format download of the book, too—I expect someone here could create one for you out of the HTML version.)
The one that reads Mobipocket
natively is Bookshelf, which costs $10. Stanza will cost $15 when it's out of beta. Really, the best thing for reading the book on the iPhone right now is eReader, which is free, and—more importantly—takes advantage of the polished markup that
I did.