As has been already stated you obviously need the paid version of MonoTouch and the iPhone SDK. Once you have those sorted you need to create a developer certificate in the iPhone developer portal, download it to your dev machine and add it into your keychain.
Once you have done that you must create a provisioning profile for your physical device, which again you do through the developer portal. Once you have the provisioning profile, download that to your machine, and add it to the iPhone via the Organiser app in XCode.
Then fire up MonoDevelop, and if it's all gone to plan then you should have the option of deploying the build to your iPhone. You can check that MonoDevelop has correctly detected your certs by opening up the Project Options window and under the Build section and under iPhone Bundle Signing, you should see your developer cert and provisioning profile.
Full details of the steps required on the Apple iPhone Dev Site