Spelling Champion is the first app written by my former colleague Peter Lu. It makes clever use of the voice API, reading a word and a sample sentence using that word; then asking the student to spell the word with his or her keyboard. It keeps track of right answers and offers a second chance if you get it wrong. The words are simple and aimed at beginning readers.
When I first saw the app, my only criticism was a lack of pictures, which I felt would help to draw the interest of a young child. Peter promised to add this in his next release.
There is a free version and a paid ($2.99) version. The paid version includes many more lessons than the free version.