Users over on Apple's support forums are complaining of a bug that has been around since the first generation iPhone and the 1x software. Even on the 3.1.2 software users are randomly getting their iPhones stuck without service while the phone says it is searching for a signal. This bug does not discriminate either, it does not care what cell phone carrier your are with, whether your device is jailbroken or not, or model of iPhone.
Currently the only way to get around this bug is if you reset your device by holding down the power button along with the home button until you see the Apple logo appear on your screen. Once booted back up your service should be restored.
Fortunately, none of us here at TiPb have personally encountered this behavior from any of our current iPhones. Any of our readers find themselves 'searching for service'?