I looked at the top 200 apps in each category for both paid and free iPhone apps, 8400 apps in total. Although some developers use up to 49 words (and all 255 characters), the majority are around 4-5 words (24-35 characters). Around one third of apps use a delimiter / separator like 'Flipboard: Your Social News Magazine'.
Stuart Hall takes a brief but interesting look at what exactly makes a name for apps in the App Store. Specifically, he is talking about the full app store name such as 'Wish - Shopping Made Fun'. Whilst Apple allows a name with as many as 255 characters (remember a tweet is only 140 characters), a big chunk of developers stay under 30 characters - which is about as long as it can be on an iPhone before the App Store cuts the name.
Hall also offers some suggestions for coming up with an app name, which are fairly straightforward and make a lot of sense. But one thing missing from the post (through no real fault of Hall's) is some anecdotal evidence from App developers who may have experimented with different length or style of App names - I'd love to hear how it affected their sales (if at all).