Every time you write software to install on your iPhone, you need two things: a key and a provisioning profile. The key identifies the person who developed the application; it stays on your computer and is used to sign the applications that you create. The profile determines which devices are allowed to run applications signed with this key; it must be installed on the device.
Distribution keys are mainly intended for each company and are intended only for use when creating a version of an application intended for distribution outside your development team. (App Store assemblies must be signed using the distribution key.) Development keys are intended for one developer, but are intended only for active use of the application.
(If you are an individual developer, of course, you only have one developer key and one distribution key. On my machine, I installed Keychain to require a password for the distribution key, so even if someone steals my laptop, it cannot issue an update for one from my applications, which compromises the user's safety. A developer key that can only install software on my personal phone is not a password.)
When you test on your personal device and install through Xcode, you need a development profile and a development key. This development profile must be installed in Xcode, which will then install it on your phone.
When you distribute a small number of others (for example, for beta testing or if you wrote an application specializing in a specific client), you need a special profile and distribution key. You will need to send an ad-hoc profile to the user along with the application. Then the user can delete the profile and application in iTunes and synchronize their phone for installation.
When you distribute through the App Store, you need an App Store profile and distribution key. Assemblies created in this way cannot run on any device that you control, but Apple's feed tools require them to be created using this profile.
So, to answer your question: you need to provide your device, but it should be a development profile, not a special profile.