I'm not sure how her grasp on letters is, but my 3 yo DD has 3 games in particular that she likes...
Endless ABC is a great one. It has 2-3 words for each letter of the alphabet. When she chooses a word, it comes up and a crowd of letters run through and scramble the words all over; leaving the outlines behind. The child has to put the letters back in place. While a letter is selected, it makes the sound of at letter. When the word is finished, it has a small cartoon explaining what the word means. My DD has been playing it for over a year now, and still loves it. :)
Lola's Party is a good one too. I only have the free lite version, but it helps. Actually, my DD started reading small words completely on her own a couple weeks after starting that one. :)
Leo's Pad is both of our absolute favorites. Each 'webisode' is $2.99, but very worth it (and i never pay for apps. lol.) So far there are only four. Each webisode is set as a storyline, where the child has to help Leo and his friends. It remembers your child's progress, and will get harder or easier based on their performance.