Honestly, it depends what your app is going to do.
MobileSafari supports all the HTML5 offline stuff, so you could store data in a clientside SQL database, cache the application clientside, etc... The mobile Gmail app is probably the most notable example of that, giving you full-featured access to your Gmail even when offline. You can also use geolocation through JavaScript APIs that were added in 3.0. Web Clips let your web app share the home screen with native applications too. There is more on using web apps on the iPhone on this Stack Overflow post.
Obviously, doing a Web app will be of interest to people who like dealing with HTML, CSS, and JavaScript (and possibly whatever language is running server-side). It is possible to do really neat stuff with offline Web apps, but its performance won't be as good as that of native apps, especially on pre-3GS devices.
Developing a native application will require you to learn Objective-C (or C# as soon as Mono Touch is available to the masses) and pay a $99 fee to be allowed to test on-device and deploy to App Store. A lot more of the system is exposed to you through the various APIs, such as the camera, compass, multitouch, and so on.
Objective-C is pretty simple to pick up if you're familiar with Java; you only really need to get used to the square bracket syntax and memory management and then it's pretty straight-forward.
Then there are the hybrid systems, like PhoneGap, which expose more of the device's APIs, provided the Web app runs in a special container app. It is also crossplatform, so you could also deploy the app on Android and BlackBerry if you wanted to. This still requires you to pay the App Store fee, but if you're more familiar with Web development, this gives you the best of both worlds.