The programming for IPhone is done in Objective-C, using the Cocoa Platform. Where I work, we have one or two people exploring IPhone dev for a project - they program on IMacs (I think any Mac will do) using XCode, which comes with OSX.
You have to buy a developer license ($99) from Apple only if you want to publish your programs to the App Store. Otherwise you can just join the developer program (free registration, I think) and download the SDK, which has all the tools you'll need (if you're on a mac). For real-world testing, you can substitute an IPod touch for the IPhone, unless you're using GPS.
