The main problem with using an on-camera flash is the same as using the built-in flash, the light goes straight at the subject and flattens features and can cause red-eye. With an on-camera flash you almost always want to use a diffuser if shooting straight on. There are a wide range of diffusers such as my favorite, the Gary Fong Lightsphere. What you really want to achieve is a larger light source to help prevent harsh shadows. Without a diffuser, your best bet is to aim the flash at something you can bounce the light off of such as a wall, ceiling, foam board, reflector, or even a white shirt.
In a pinch, I have seen napkins, sheets, playing cards, index cards, and small children used to bounce light. A diffuser like the Gary Fong Lightsphere works well because it not only send light towards the subject but will bounce light from all directions softening shadows very nicely. This type of diffuser is great for event photographers (like weddings, etc) because you can’t always set up an optimal lighting setup during an event like that.
