It depends a lot on where you're iterating. If you're iterating concepts and structure, sketches work perfectly. If you're iterating the size of a shadow, the exact color pallet, the exact shape of a logo then you'd better be in Photoshop.

For all 37s likes to talk about not using Photoshop they don't have pixel-perfect design at all and yet still had somebody slaving over Adobe products while putting those logos together.