I’m not always a big fan of 3rd party Twitter apps (beyond the desktop apps) as most are still either pretty rudimentary or focused more on ego-stroking than anything else.
However, this is pretty darn nifty (especially if you use the Twitter web page more than anything else):
Tweetree puts your Twitter stream in a tree so you can see the posts people are replying to in context. It also pulls in lots of external content like twitpic photos, youtube videos and more, so that you can see them right in your stream without having to click through every link your friends post. See what twitterers are saying about us!
Check it out here: http://tweetree.com/samharrelson