OpenClip is an open-source framework that brings copy and pasting between apps to the iPhone (without jailbreaking!) by exploiting the fact that applications can read from another application's documents directory, endrunning the sandbox issue. Apps using the framework look through every app's doc directory for the most recently changed OpenClip file to get the paste. Here's the thing: Daring Fireball's John Gruber points out that this convenient loophole is slammed shut in the iPhone 2.1 beta. Update: OpenClip has a post in response to 2.1 breaking C+P between apps.
As he notes, the Apple's iPhone Programming makes it clear that OpenClip's execution was making clever use of a loophole, rather than operating on totally safe ground:
"The sandbox is a set of fine-grained controls limiting access to files, preferences, network resources, hardware, and so on. In iPhone OS, an application and its data reside in a secure location that no other application can access."
Access being the key word there. In the most recent 2.1 beta, the sandbox has been reinforced with titanium so that apps are no longer allowed to access another application's data, driving a stake through the heart of OpenClip's implementation—it doesn't work in any of the 2.1 releases, to wit. Apparently the stronger sandbox was in play before OpenClip made its splashy launch, so it's not just Apple being mean (aside from the fact they haven't given us copy and paste in the first place). Either way, it'll be back to waiting for Apple to deliver, unless you go the jailbreak route.
If you're unacquainted with the iPhone's file structure, Gruber's post makes for good education anyway. [Daring Fireball]