Applying the iPhone Password
If you want to set up the iPhone password start by going to Settings and then select General, which is at the top of the third block of options right above Mail, Contacts, Calendars. Go down to the fourth block of options in General and select Passcode Lock, which is right below Auto-Lock. It is in Passcode Lock that you can set your iPhone password and make changes. Start by pressing the Turn Passcode On button at the top, which will take you to a prompt where you will be asked to enter in a passcode twice.
Once you have set this iPhone password you can then have a few options. You can press the Change Passcode if you need to change the iPhone's password, and below that is the Require Passcode area where you can select how long you want before the passcode is required. It will be set to Immediately right from the start, which you may want to keep it at.
Below Require Passcode is an On / Off switch for the Simple Passcode, which is the four digit numerical iPhone password. This is going to be default for your iPhone's password unless you turn it off. This is what you are going to do if you want to allow for the longer, multi-character iPhone password that is much better for iPhone security.
At the bottom of the Passcode Lock menu will be an On / Off switch for Erase Data. What this will do is automatically erase all content on your iPhone if there are ten failed attempts to enter in the iPhone password. This is the most extreme iPhone security option within the Passcode Lock menu, so choose it if you have a lot of sensitive material on your iPhone.