Vlingo had no trouble with my voice, though it was not 100% accurate. I had to tell it "comic books" as it couldn't figure out what "comics" was. A search for a contact's name in my address book worked on the first try, as did a search for PC World in Google and a Twitter update of "Testing Vlingo."
Though it is voice activated, it is not hands-free, as you still must hold the screen to talk your command and touch the screen to confirm every time you voice something. Still, it's wonderful when you don't want to wrestle with the iPhone's sometimes-frustrating touch screen. For example, you want to search for something but you don't want to have to spell it correctly. Or, you want to call someone quickly without scrolling in your address book first. Or--and we don't actually advise this--you're driving. Vlingo can save you a lot of time.