The rial is the official currency of Iran, however to save time in a high-inflation economy prices are sometimes quoted in tomans (تومان). One toman is equal to ten rials.
As a general guide, written prices are given in rials and prices quoted in conversation are in tomans. To confuse you even further, shopkeepers will often omit the denomination of high prices, so you may be told a jar of coffee costs 2 tomans (meaning 2,000 tomans or IR 20,000) and that a fine rug will cost 3 tomans (meaning 3,000,000 tomans or IR 30,000,000). In conversation, 1 Khomeini denotes IR 10,000.
Most travellers spend the first few days of their trip coming to grips with this mind-boggling system, and money changers on the border will often exploit this confusion to rip you off. Be careful, and if in doubt, always ask a shopkeeper or moneychanger if they are quoting a price in rials or tomans.
Carrying money :
Iran is still a cash economy, so bring enough hard currency for the duration of your stay. US dollars and euros are the most useful, and new and large (USD 100 or EUR 100 or higher) bills in good condition are perfered and usually get a better rate. Trade embargoes mean that banks will not forward cash advances on your foreign credit cards and they are only accepted by some stores for large purchases, such as Persian rugs. Most will be happy to forward you some cash on your credit card at the same time as your purchase. If you are desperate for cash, you can also try asking these shops to extend you the same favour without buying a rug or souvenir, but expect to pay dearly for the luxury.
ATMs exist in most cities, and there are point-of-sale devices in some larger stores, but only local bank cards are accepted.
Money and daily life :
There is little point in risking the black market moneychangers who loiter outside of major banks and only offer marginally better rates than the banks. Central banks in most cities will change money for you, but the process can be a drawn out affair requiring signatures from countless officials and a fair deal of running around.
A better compromise are the private exchange offices (sarāfi) scattered around most large cities and major tourist centres. Although their rates are comparable to those of the banks, they are far quicker and, unlike their black market colleagues, they can be traced later on if something goes wrong.
The most widely-accepted currency is the US dollar, but euros and UK pound sterling are also widely used. Other currencies are harder to change. $100 notes attract the highest prices, and you will be quoted lower rates for any old or ripped notes.
Bargain ruthlessly when buying handcrafts, rugs or big ticket items and modestly when hailing private taxis. In most other aspects of life prices are fixed. Tipping is generally not expected, but locals will generally round up the bill in taxis and add around 10% in classy restaurants. Porters and bellboys will expect 100,000 - 200,000 IRR. A discreet gift of a few thousand tomāns may help grease the wheels of Iranian society and serve to thank an extraordinarily helpful local, but bakhsheeh and bribing are not a major part of Iranian life.
Government has eliminated 'foreigner' prices from many tourist attractions and all of the hotels.