My son LOVES My Play Home....I think it cost $3 but worth it, it's like a giant interactive doll house and you can make the family do different things! He also likes the "talking" apps (talking Tom, talking Ben, talking Ginger), and Pizza Maker and Cupcake Maker. Also Toca Monster. These were all free.
Not sure which were free but these are some favorites around here
More Cookies
My First Tangrams
Toy Story 3 Memory game
Fruit Ninja
There's more but my son has the iPad and won't let me look at it.