[You can set the iPad itself to be the board][link], and keep the letters on individual iPod Touches(?) or iPhones. Very neat, and the picture in the linked article is worth 1000 words.
[link]: http://www.engadget.com/2010/04/04/scrabble-for-the-ipad-stir-in-some-iphones-and-its-the-best-1/ “Scrabble for the iPad: stir in some iPhones and it’s the best $1,000 you ever spent on a board game — Engadget”