Turns out the password can be easily bypassed:
XRY works by first jailbreaking the handset. According to Micro Systemation, no ‘backdoors’ created by Apple used, but instead it makes use of security flaws in the operating system the same way that regular jailbreakers do.
Once the iPhone has been jailbroken, the tool then goes on to ‘brute-force’ the passcode, trying every possible four digit combination until the correct password has been found. Given the limited number of possible combinations for a four-digit passcode — 10,000, ranging from 0000 to 9999 — this doesn’t take long.
Once the handset has been jailbroken and the passcode guessed, all the data on the handset, including call logs, messages, contacts, GPS data and even keystrokes, can be accessed and examined.
One of the morals is to use an eight-digit passcode.