One of the bug fixes in the Apple 1.1.4 firmware upgrade was related to securing the PassCode functionality. The flaw was whenever the iPhone is password protected tapping “Emergency Call” on the password entry screen & double-tapping the home button would take you to the favorites (which is the list of frequently called numbers …) and further accessing these contacts opens up the email application and Safari!
But when Apple updates the iPhones to Firmware version 2.xx the same was left behind. So the flaw still exists in all iPhone 3G’s and also affects iPod Touch.
However, Apple has confirmed a fix in soon, and the security issue has been termed MINOR as there are easy workarounds to the issue.
For users looking to secure themselves for the moment, can change the iPhone preferences to bring up the Home Screen instead of the Favorites (showing up the passcode entry screen instead of contacts).
Update: iPhone Firmware 2.1 is out