^ Apple Claims this.
but a macrumor member claims this
"This is simply not true. Even the remote wipe is not 100% full proof. While it is a feel good measure for the average consumer, there is still a real risk if someone is really wanting your data train is willing to work hard to get it.
The encryption is really weak and not that complicated and the data is still on the device. There are many free and paid tools that will allow law enforcment and experienced hackers to recover large amounts of data from the iPhone.
The Passcode and secure erase are just feel good measures like dead-bolts on a door. The week link is not the dead-bold but the door frame.
The good news is that this security exposure has been around as long as data was store on any media so you just have to decide how paranoid you are about someone spending hours trying to recover you data and if you really have something to hide..
Anybody who knows a lot about encryption and security want to provide their two cents on this?