If you have dropped your iPhone in water, or spilt liquid onto it, do not panic. Also, do not turn it on or dock it to your computer. Water damage is not covered, either by your one-year limited warranty or by the AppleCare Protection Plan; and the Apple employee at the Genius Bar will be able to tell that your iPhone has water damage because the Liquid Contact Indicators located inside your headphone jack and your dock-connector opening at the bottom of the iPhone will turn red. But you may be able to save your iPhone yourself.
Remove your iPhone from the water or liquid as soon as possible. If it is on, hit the "Sleep/Wake" button on the top of the phone to turn it off. Do not turn your iPhone on. Do not dock it to your computer. Turning it on when wet will do more damage.
Wipe and dry the iPhone with a microfiber cloth. An old T-shirt or a very soft towel could work. Do not use any paper product, no matter how soft. You could scratch your iPhone screen with a tiny wood fibre in it.
Place your iPhone in a large plastic bag and cover it with uncooked rice or silica gel packets. Seal the bag.
Let your iPhone sit in the bag for at least two days. You may need to keep it in the bag for a week. Be patient. The rice or silica gel packets will draw the moisture from your phone--but it takes time. Keep this bag handy. If your iPhone behaves strangely after it starts working again, put it back in the bag.
The Apple Store has changed its policy regarding out-of-warranty, water-damaged iPhones. Now it will extract your SIM card and swap your damaged handset with a refurbished, working one for a fraction of what buying a new iPhone would cost.
Depending upon how long your iPhone was submerged in water or exposed to moisture, this process may save your iPhone or at least enable you to save the information, photos or video that you saved on it.