I use a stylus with a few apps, but primarily UPad, a note-taking app I am fond of. Note Taker HD, and Notability are other apps which do the same thing.
In Upad, you have a page, and can either free write, OR use the magnifier function to have a writing area on the bottom of the screen, which replicates what you write in a smaller part of the page. When you do this, it creates very clear text. Documents can be exported to PDFs, and sent out of the app in many ways. The text is not OCR-able inside the app, but it could be scanned in other OCR programs. To be honest, that has never been a goal for me. They also allow you to create text boxes and type with the virtual keyboard.
When I am at meetings, I am always taking notes, in UPad, and can then export all of them (sometimes as many as 10 pages, on the state board I am on) into my information manager (DevonThink Pro Office). I no longer have spiral notebooks filled with stuff; that is hard to find. Instead, I have everything electronic. It works great.
Alas, Upad is waiting for a retina upgrade (I have been in touch with the company and they are working on it; but its pretty much unusable at the moment on the iPad 3. The other two programs work, but also need upgrades, the writing area is still based on a resolution of the iPad 2, and while they work, the text you draw does not look as crisp as it did on the iPad 2. But this will come with time.
I don't use a stylus all the time, but when I am in a meeting, it really is valuable. And I can write pretty quickly - and create documents that are actually more legible than my handwriting on paper!
I have had several of the cheap ones, and don't regret the Bamboo at all. feels like a pen.
