I'm building a mobile phone application and have created many mockups in Photoshop CS4. When I convert said mockups into templates on my phone, the colors are lighter then shown in Photoshop and I constantly have to readjust.
What color mode or settings should I apply to Photoshop in order to correct this problem as best as possible?
You should always have your mock-ups in RGB format. CMYK tends to be darker because it more closely resembles the colour range of the subtractive (printing) spectrum.
If that doesn't help, you can try installing a colour profile for your monitor, or adjust the gamma settings.
I use the "Monitor Color" settings in Photoshop CS3. The RGB color space is set to Monitor RGB - Display. I think it's the same in CS4. This turns off color management, and the RGB values in the document will map to the device's color values, which is how most devices work.
However, when I do work with photographic files, I usually use Apple RGB or Adobe RGB. The sRGB color gamut is very conservative and will result in washed-out colors when you export them for web.