I am developing a business app for use on an iPad/iPod Touch. I am wondering if there is a way to restrict usage on the device to my app only. In other words, we don’t want employees installing other apps such as games and playing around with the devices.
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Yes, that’s possible.
Check out the iOS Configuration Profile Programming Guide.
Edit: See the section about restrictions, it will allow you to do exactly what you need. Note however that you’ll need to have access to those devices, ideally the devices should be company property. And you need to distribute your app via Enterprise Distribution.
Edit 2: Since iOS6, this feature is available through the normal settings app. It is called “Guided Access” and is part of the Accessibility settings. It will let you disable the home button (cancel guided access by triple-clicking the home button and enter the preset code) and it will even let you define areas within apps which should be disabled.