What's the point?
There really isn't one - this is a toy that you can play with. What you do with it is up to you.
But what does it do?
Consider this example:

There are clouds at the top that cause water to rain down. That water collects in cup shaped walls (one of which has a leak in it). There's another oil spill that generates oil (which, as you can see, floats on water). In one corner is lava, making fire, which will ignite the oil if it spills on it. In the other corner, plants grow in the water that spills over, growing up into that bottom cup. Soon the plants will completely grow to fill that bottom cup, and also start growing into the top one. In the mean time, the oil will collect, spill on to the lava, which will then flame up, burning the oil, and probably causing a spark to ignite the plants and burn them all to the ground. And then things will start all over (influenced by how you're holding your iPhone/iPod Touch).
How do I change what I'm putting down or erase everything?
Tap on the icon (showing the current element) in the bottom left corner.
What else can I do?
Tap on the "info" button on the right corner, which will show you the "back side":

From here you can change the side of how wide you "paint", put a border around the edge, and save your creation (not unlike making a new tab in Mobile Safari).
What are all the elements/what do they do
From the back side, you can tap the "Rules" button to see the rules:

Tapping on any one of the various icons will give you a summary of what it does.