Cue the Jaws music... According to ifoAppleStore.com it seems Apple has recently changed their policy on water-damaged iPhones. Effective now, Apple will replace the iPhone you dropped in your toilet with a new or refurbished phone - guess that would depend on what kind of mood the Genius is in - for $199 without extending your contract for $199.
There was some confusion earlier about the "no contract extension part" of the deal. Before this policy was in place, customers had to buy a new phone and extend their contracts at the same time. I actually stopped into my local Apple store while I was at the mall this evening, and they verified this is indeed a recent change (and a much appreciated change at that).
So what do you think, is this a way for Apple to dump more stock in time for July or are they just feeling that extra love for us iPhone owners?