Iris apologizes to Ash for all the times of calling him a kid and remarks that he is a good trainer, while Ash does so for berating about her ice-type phobia in a spiteful manner and states that she will eventually conquer it and become a great dragon trainer, and then they hug each other.
Note: before anybody (mainly shippers) go crazy over this, let me make one thing very clear. This is not a loving hug, but rather, an intimate and apologetic hug.