Nexercise is a free iPhone app that encourages you to exercise by providing three carrots:

1. Earn points to quantify your activity and qualify for daily and monthly prizes.
2. Redeem points for discounts at nearby locations.
3. Social: Exercise with friends to earn bonus points. Share information on Facebook.

New iPhone app offers rewards for exercising (Reuters)

Nexercise is able to offer the app, services and discounts/prizes by relationships with the vendors and in-app advertising. Future add-on modules (including ones from third party developers) may be offered for a premium in the future.

The app tracks your level of activity as you exercise (including walking). It requires that any activity you choose be pursued for at least 15 minutes in order to log it and accumulate points. There is an option for “non-validated” activities that does not require the iPhone to be carried to automatically track activity.

Nexercise (iTunes App Store)