TidBITS has an interesting write-up on the various security features of iPhone 3.0 in general, and the 256-bit AES hardware encryption of iPhone 3GS in particular, and how combined together:

consumers can now experience enterprise-class security.

They cover passcode lock, data erase, remote wipe, lack of insecure external data cards, frequent and easy to install software updates/security patches, and (encrypted) backups that can restore your data if your device is accidentally wiped. Definitely worth a read if you tend towards the security conscious.