I've been using it for a little while now and have to say that I like the way it works. That said, it could stand improvement.
As mentioned, it disables auto-correct while it is installed. It will also not auto-correct grammar/punctuation. Yes, those are two pretty big gotchas but I will contend that it is not a deal breaker, and here's why:
I'm a horrible typist on my iphone. I've never much like Apple's version of auto-correct and have used ManualCorrect in the past, which I liked much better. But what I've found with Octopus Keyboard is that it is really pretty darn good at predicting what word you are planning on using that you can really type sentences very fast. The chances of misspelling a word are reduced because it is also pretty smart in figuring out what you are trying to say. Not only that, it learns at it goes and gets even better at predicting what you want to say. I'm not kidding!
Like I said though, it's not perfect. It doesn't always know when you are ending a sentence. After swiping in a predicted word it will automatically add a space, ready for the next word, which makes forming sentences all that faster. But when you get to the end, you usually have to either add the appropriate punctuation yourself, or for a period, backspace and double-spacebar for the period. It's a little clunky, unless I'm missing something. I'm sure something clever could be done to make that a little more streamlined.
The other thing would be auto-correction for spelling and grammar. OctKey does do a bit of "spelling correction" by offering up words that it thinks you mean. It's not 100% but it helps. On the other hand, I haven't found any instances where it offered up punctuation options such as "it's" instead of "its". That is something that I would definitely like to see added in a future update.
All-in-all I think it is a great tweak and worth a few bucks.