You can use the mic button on your iPhone headset to perform certain functions such as answering a call, putting calls on hold and skipping songs while listening to music.

Answer an incoming call:
Click once.

End the current call:
Click once.

Decline an incoming call:
Press and hold for two seconds, then release. Two beeps confirm you declined the call after you release the button.

Switch to an incoming or on-hold call:
Click once. Click again to switch back to the first call.

Switch to an incoming or on-hold call and end current call:
Press and hold for about two seconds, then let go. Two beeps confirm call has been ended after you release the button.

Pause a song or video:
Click the mic button once. Click again to resume playback.

Skip to next song:
Click twice quickly.

Source: iPhone Users Guide