The best setting for the built in firewall is "set access for specific applications". Click the + and add whatever application is related to the iphone to the list(itunes?).
The least secure setting is "allow all incoming connections"
The most secure setting is "allow only essential services" (middle one)
The most flexible setting is "set access for specific applications"
I'm also running little snitch right now, but I'm fairly certain it will block me when I'm away from home and want to use "back to my mac". I have not registered little snitch but I'm thinking about it. The built in firewall is focused on keeping out incoming connections. Little snitch is focused on keeping software on your machine from going out on the net and sending out information behind your back. Little Snitch reminds me of Zonealarm on the pc.
Running OS X behind a router with "allow all incoming connections" is no big deal. Running OS X in a free wifi hotspot with that setting is not a good idea.