
In the past, if an iPhone owner had damaged their iPhone or iPhone 3G via liquid submersion (fell into a pool, toilet, spilled a drink on... your imagination can run it's course), Apple and AT&T effectively made the user buy a new contract and get a new phone; they weren't going to fix one with damage done that doesn't fall under their warranty.
Reports are coming in that Apple has started offering visitors of their Genius Bar replacement iPhones at contract price, without having to sign up for a new contract. Whether this is a complete tonal shift for the companies, or speculation of a way to clear out backstock of the iPhone 3G ahead of time for new models (which I've speculated about here and here) is unknown.