While the iPhone application for Instapaper Pro is being held up by Apple's App reviewers, Marco Arment (developer for Instapaper) has launched the new Instapaper website. Which now supports folders (the number one requested feature), making it easier to organize your offline reading.
When creating a new folder, you can choose an organizational folder that contains "Another Users starred items", thus adding a social networking component to the folder enhancement. For example you can create a fold that contains articles that have been "starred" by Marco.
All of this functionality is now available on the website, and will be available on the new iPhone application as soon as it is approved by Apple. For now, Instapaper Pro 1.3 is available for $4.99 (half price) at the App store (free upgrade to 2.0). As a user of Instapaper - $4.99 is a steal!