I'm writing an iPhone app in simulator/debug mode at the moment. I'd like to know, after I build it, where does the binary go? I want to send this file to my friend to show him what I'm doing so far.
Also, how do I package apps into .dmg files? That seems to be the better format to send app to other people?
Have you joined the iPhone Developer Program? If so you will need your friend's device ID to generate a provisioning profile. I recommend that you read Publishing Applications for Testing for more details.
Your binary files will be on {Project Folder}/build/, there you will have one directory for each of the possible options: Release/Debug and iphoneos/iphoneSimulator.
To create the DMG read Creating a .DMG.