The USA's IT Security group, US-CERT, has warned of a security issue with iPhone 3G and later models which allows the bypassing of password-based security by a person who holds the phone.
The issue is described as follows:
Race condition in Apple iOS 4.0 through 4.1 for iPhone 3G and later allows physically proximate attackers to bypass the passcode lock by making a call from the Emergency Call screen, then quickly pressing the Sleep/Wake button.
The current version of the iOS is 4.2. See http://www.apple.com/ios/
"physically proximate" means that someone is holding your phone.
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