iOS 5 introduced Private Browsing, which can be set via Settings » Safari.
To tell whether you have Private Browsing turned on when using Safari on an iOS device, the chrome around the browser window will be black. When Private Browsing is turned off, it's the standard bluish-gray.
[crarko adds: A useful find, and I admit I hadn't noticed the addition. I always used a third party browser if I wanted this feature.]
Mac OS X Hints