I'd like to make a side scrolling flying game where the terrain (hills) is generated using mathematical functions .
Has anyone done that and if so, what's the best way to store all that data and to display it in Cocos2D?

Write your own OpenGL rendering inside of a Cocos2D node's draw method. Unless you want to make a tileset to do it... eww.

Cocos2D's utter lack of state management is pretty frustrating when writing your own rendering functions though.

I am suspecting you want to duplicate tinywings. See http://www.cocos2d-iphone.org/forum/topic/14136

Ugh. So much misinformation in that thread. Pixel shaders to procedurally draw a 1D heightmap? Really?

All you need is a triangle strip and a repeating texture. That's how ByteRacer does it: http://howlingmoonsoftware.com/extras.php and it's trivial.

The shading on the hills could be done with simple vertex coloring.