I am currently using the google maps' reverse geocoding API to convert long/lat received from an iPhone's CoreLocation API into city/state information on a google app engine server.
Would this be considered a violation of the terms? I've done some research and cannot find a direct answer to this question.
Right now, we will be distributing our iPhone app for free.
No, it is not against the terms on Google's or Apple's side. Unless, you use it for a turn by turn app (Like a GPS).
According to Google's Terms of Service, you can only use the geocoder in conjunction with a Google Map.
You may not:
use or display the Content without a corresponding Google map, unless you are explicitly permitted to do so in the Maps APIs Documentation, the Street View API Documentation, or through written permission from Google (for example, you must not use geocodes obtained through the Service except in conjunction with a Google map, but the Street View API Documentation explicitly permits you to display Street View imagery without a corresponding Google map)