From Wired:
A security flaw in the iPhone allows strangers to bypass the handset’s lock screen with a few button presses.
Read More http://www.wired.com/threatlevel/2010/10/iphone-snoop
Verfied it happens on my Iphone 4 with 4.1 with a simple and non-simple passcode.
Nasty, keep those phoens physically secure!