You can use a variety of image formats with your app: .png, .jpeg, .gif, .tiff, .bmp, .ico, and .xbm. The recommended image format is PNG; when your app is compiled, the PNG images are optimized for the iPhone.

Here are some graphics programs you can use to create your images:

PaintCode and Opacity will generate Objective-C drawing code for your graphics, so you don't have to embed actual graphics files in your app.

Supporting Apps

Prepo converts your @2x-sized images down to half-sized versions (for supporting retina and non-retina displays).
Skala Preview - view image previews of your app design on your mac or any iOS device.
	Griddle - A simple grid generator app for the Mac.

Photoshop Tools:

The App Icon Template is a PSD file that uses smart objects to automatically render your app icon in all the various sizes needed.

Dev Rocket is a Photoshop plugin that helps you create graphics and icons for your iOS apps.

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Tools for creating App Mockups