There are a number of apps available for iOS for music creation, ranging in complexity from simple synths and virtual drum kits, to quite accomplished sequencers/DAWs (Apple's own garageband is a perfect example). If i remember rightly Damon Alban created the newest Gorillaz album entirely on the ipad [1]

Note: I don't own an ipad, i just lust after all the cool music apps. I wish people would get started creating equivalent apps for android tabs (though i understand there were historical issues with the audio API in android, which i believe were rectified as of ICS)

[1] http://www.nme.com/news/gorillaz/53816