A forum post on MacRumors explains how to end-run the password on a locked iPhone. It's so easy it hurts:

2.0.2 gives almost full access to the iPhone even while under password protection...

Steps to Reproduce

Set iPhone to use passcode lock, have contacts marked as Favorites with links, phone numbers, addresses, etc in address book entry.

Tap "Emergency Call" keypad from passcode entry screen.

Double-tap home button.

Tap blue arrow next to contact's name. You now have full access to applications such as Safari, complete Contacts list, SMS, Maps, "full" Phone access, and Mail by accessing various entries on the Favorite's page, i.e. tapping their home page brings up a full, unrestricted Safari.

(Photo by Getty Images/Sean Gallup)

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