Forget Apple's expensive Find My iPhone program. iHound is the way to go.
iHound is an iPhone / iPod Touch / iPad tracking app that incorporates many of the iOS's unique features. Now, with an update for iOS 4, it's better than ever, and I'd argue that it's the best iPhone tracking service out there. Here's how it works. You go to ihoundsoftware.com, make an account, and then download the free app. The service is free for a month; after that, you can purchase a longer term at $10.99/yr. Compare that to MobileMe's $99/yr requirement for Find My iPhone. Yikes!
Once launched, iHound functions in the background, transmitting your device's location every 10 minutes. You can opt for always-on tracking, too, as long as you don't mind the battery drain. Now, if you lose your iPhone, you log on at the iHound website. From there, you can view your device's current location and / or send a push notification to your device ("Hi there, I've lost my iPhone--please call 555-555-5555!"). Better yet, you can force your device to emit a loud, wailing siren noise. That's sure to catch someone's attention. And if someone turns your phone off, iHound will launch and transmit its location once the phone is turned back on.
What makes this even sweeter is that with iHound, you can have as many devices as you want on the same plan for no additional cost. (Take that, AT&T...your FamilyMap plan just got crushed.)
I've just installed iHound on my second-generation iPod Touch, and I was quite impressed. Not only did iHound pinpoint my location, but the push-notification and siren options work extremely well. It's true that with an iPod's dependence on WiFi, iHound isn't foolproof, but at least I won't lose my iPod in my own house any more. Furthermore, for iPhone and 3G-enabled iPad owners, this is a no-brainer. iHound is a fantastic, affordable, and highly functional tracking system, and with iOS 4's background capabilities it's finally a complete app. Forget MobileMe and Find My iPhone; get iHound!