MxTube is a native iPhone app that downloads YouTube videos to your iPhone’s local storage drive. It has a slick interface much like the native YouTube app from Apple, that lets you search for videos and schedules tasks to download either a Wi-Fi or Edge version of the video.
MxTube is available from Installer.app after adding and refreshing your Community Sources app. Max is the 13 year old developer of MxTube. Big props to Max! check out his website here.
Here is a video demo of MxTube running on the iPhone:
Use iPhone mods and hacks at your own risk! Installing 3rd Party iPhone apps requires you to jailbreak the iPhone before installing the native software and apps. You can use Installer.app for Mac OSX and iBrickr for Windows PC to do this. Browse the full list of all iPhone and iPod touch native 3rd party apps filed under the software category.
More info here