The iPhone's iPod interface features CoverFlow, a list of albums shown by album cover art.
The CoverFlow interface works on the iPhone is a similar way to how to works in iTunes: album art is displayed and you can scroll side to side through the covers to select albums or songs. CoverFlow is enabled on the iPhone by turning the phone to the side. You can then flick through album covers. When you tap on the album cover, you get what's shown here: a listing of the songs from that album on the iPhone.
To play a song, just tap it.