I wondered where it had gone.
Turns out it's 3GS only dedicated hardware encryption, and it's invisible to the user ...
... According to Apple, all data on the iPhone 3GS is encrypted by default...Great feature, though I'd like to see the ability of 3rd party apps to use it app-specific longer pass-phrases.
Update 7/21/09: I think Gruber pointed out that remote wiping doesn't require removing all the data, just the unique decryption key. So the data is still there, but it might as well be on the far side of the moon (unless there's a backdoor or a big math breakthrough ...). A NYT article on ‘vanishing’ data is relevant – the way to make data “vanish” is to require access to a centralized decryption key that can itself disappear. See also – DRM and the case of the vanishing Orwell.