I actually had 2 16gig iphones with dead pixels. They were both exchanged at the Apple store by the genius. I would take the phone to ATT. My understanding is they have nothing to do with hardware issues. They will direct you to the Apple store.
As for what a dead pixel is, at least on my iPhone (as I have not experienced one on another LCD screen), is a bright spec almost like a star in what would otherwise be a completely black sky. I know, dramatic but thats my comparision. Usually you can see them when your iPhone boots or shuts down, or with a black screen. HTH🙂