Scary stuff in the news...
"iPhones sold as refurbished units may contain personal data from their previous owners that, with a little leg-work, is readily accessible by new owners. These data include email, images, contacts and more. ...performing a “Restore” operation on the iPhone does not delete personal data from the device. Such information remains intact on the device after a restore, making the process unsuitable as a preparatory measure for iPhone resale or service. Apparently, Apple’s refurbishing procedure also does not delete the personal data.
There currently exits no viable, publicly available method for erasing personal data on the iPhone. Erasing your content and settings has no effect on whether a subsequent owner can recover personal information." (source)
Kevin's Reality Check
1. Go into Settings > General > Reset
2. Hit "Erase all Content and Settings."
This will keep your info from most people, but not forensic types with toolkits. They can access what doesn't get erased - the application screenshots. Screenshots are taken every time the Home button is pressed. Reason: to generate the zoom effect for the next time an application is accessed.
Still paranoid?
• Make new screenshots after you erase all content.
Still paranoid?
• Search the net for info on reformatting the phone's NAND.