Yes, I know of two. Voxie and Jott. Voxie version 2.0 has a subscription transcribe service, and Jott.com has a service called Jott Assist.

Voxie allows you to record in 4 different audio quality settings, so you can make small and large files depending whether you're on wifi or 3G (or edge). It looks very nice, and support wallpapers. More info here
http://www.bottlerocketapps.com/#/voxie/
Voxie gives you the option of a transcription service "add-on" for a fee, based on the number of words you need transcribed each month. Depending on how much you use it, this may get a little expensive. Links to the service and other details are below.

Jott Assist is focused on the transcription service, not necessarily the quality of the recording. Jott Assist is more of an professional service. More info here http://jott.com/jott/jott-assistant.html
The prices are based on the length of the recordings you can make, not the amount of words you can use. This seems to be the better option, and looks like the least expensive. links to their service options are listed below as well.

Both of the apps have trails, so you can try them out before committing to paying for it.

And just in case you don't like either one of them, here is a review of 15 recording apps for the iPhone fro last August:
http://www.ilounge.com/index.php/articles/comments/iphone-gems-every-voice-recorder-reviewed

Bboth reQall and Dial2Do can do this, and so can Jott. The first two are free in Beta; Jott's official and costs. Jott and reQall have iPhone specific aps, while Dial2Do's function list reads like a listing of the best of current internet applications, websites and services (only it's missing Mahalo Answers, hint, hint). You can blog, social network, get things done, and even store things to Evernote with Dial2Do!

Not only can they do this, but you can hands-free email people while driving with these services. No excuse for driving while intexticated!