SNS not only allows you to use your iPhone to create a game from the ground up, but also gives free access to the multitude of games that others have already made. And did I mention it's just a buck?
When you start playing with SNS, you'll likely start by building from an existing shoot-'em-up skeleton. You'll draw the hero and enemy ships on a piece of real world paper, take a picture of them with your phone and they'll immediately be imported into the game. That's the basic version. While not particularly robust, it's a perfect way to keep kids occupied for hours. (Be warned: You may have to experiment a little bit as proper lighting is really important.)
Once you bump it up to advanced, you'll be customizing everything from your title screen to how much health your boss has. You'll even be able to draw levels and place enemies and power-ups throughout. If you're not much of an artist, don't sweat it, SNS has plenty of packed-in assets.
You're not even necessarily limited to shoot em' ups. For instance, one game creator has even made a sort of racing game by removing guns and forcing you to swerve in and out of traffic. You'll be able to find, play and rate that and literally hundreds of other games that fans have made available.
If it seems I'm cheerleading for Sketch Nation Shooter, you're absolutely right. It's a great idea, it's a ton of fun and at just $0.99 it's one of the best values on the App Store. Just go buy it and get started on your own masterpiece.
Sketch Nation Shooter (Engineous Games, $0.99):