I can't believe I missed the release of Google Translate (free) last month. Or maybe I assumed it was just another app for text translation. But it is so much cooler than that. It can also do speech recognition, such that you canspeak the phrase or sentences that you want translated, and it will speak back to you the phrase or sentences in the target language. It's fun to play with. When you speak the text, it shows on-screen what it thought you said as well as a text translation. Then if you tap the speaker icon, it speaks the text.
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Google Translate (free) -- speak what you want translated, and it then speaks back translation
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