A few weeks ago I purchased the iPad App Noterize to assist me in editing a novel that is still in draft form.
This is probably the most useful application I have on the iPad. Basically you import a pdf file (from a variety of sources) onto the iPad and can then make markup notes on it using a stylus. You can write notes or paste typed sticky notes on the manuscript and then send the annotated manuscript back to the computer. The editing experience is identical to paper without the mess. It also allows you to record page specific audio notes, which was useful with a story I had my wife proofread, I discussed it with her and just recorded her comments so I could review them later.
The only drawbacks I’ve ran across is that the page turning is slow and it has trouble with larger manuscripts. The second is not really a big deal — for my novel I just had to break it into three sections.