I am using a MacBook Pro running Mac OS X 10.5. I am new to this development environment, and previously worked on Windows.
I use iTerm on the Mac, as well as the standard Terminal app.
Terminal is built into the operating system. It's free and fulfills much the same purpose as xterm on Linux.
iTerm2 is insanely superior to Terminal and iTerm.
As of 10.5, Mac OS X ships with X11, as well as a few standard X applications (namely xterm, xman and xlogo).
You open an XTerm window by starting X (it's in /Applications/Utilities), and while it's active go to Applications/Terminal, or press cmd+n.
I have no experience with iTerm, but there are a few minor features not present in Apple's terminal, such as mouse support, which do happen to work in XTerm there.
Mac OS X also ships with OpenSSH, which can be started with
ssh at the command line (from Terminal, iTerm, XTerm, whatever), which is pretty much the best SSH client.