Apple will not swap or repair a water damaged iPhone / iPod touch even if it’s still in warranty. As with most handheld devices, the iPhone has a built-in water damage detector (Blackberry has it next to the battery). It’s not a very technologically advanced detector but it does the job.
If you need to check your iPhone or iPod touch water damage indicator follow these instructions:
Remove the headphones from the device
Use a light and look directly down the headphone socket
At the base of the socket is a water detector (it’s just plastic or paper that changes colour)
RED means water damaged
WHITE is no water detected
(The iPhone 3G and 3GS have an additional detector located at the bottom of the case near the screws)
If it’s white then take it back to apple and get it swapped out (Don’t tell them it got wet)
If it’s red then forget taking it to Apple. (I wonder if you could open the iPhone / iPod Touch and change the red detector for a white piece of paper? If anyone manages to succeed let me know!
You can try and remove the water from it by putting the iPhone in a sealed bag with some uncooked rice. The rice will absorb the moisture over some time if you leave the iPhone in the bag and in a warm place.