Presumably, having not tried it, it would reset all the networks which the device continued to remember authorization data for, for example a WEP key,
these would appear to be a new networks to the iPhone, requiring you to re-enter this authorization data for each of the previously remembered networks.
Basically it should forget all the data about every network you have previously connected your iPhone to. Hence why you saw it throw you off your local network so abruptly.
R-Fly