When I first started producing movies on the iPad, I simply used the internal microphone to record. However, I have found that using an external HD Microphone works much better. The one I ended up getting is called teh "snowball" by Blue Micrphones.
It was in my price range - not the most expesive for sure - but works rather well at recording. It is not easy to carry around because of the size and shape... and TSA at the airport has no idea what to make of it... However, it will also hook into your PC so that you can use it with eLearning software like Articulate and has settings to record in a close area or across a room... I like that feature as well.