Though worms for the iPhone have been identified in the past, they've all been more or less proof of concept with no real threats yet for iPhone owners. That's now changed, after the first known iPhone worm in the wild was discovered. Sophos dissected the worm and has posted ample information about it, including the note that it only affects certain types of jailbroken iPhones.

Read the whole story

And here's how to change the password (taken from theiphoneblog.com):

1) Download Mobile Terminal from Cydia (it's a great app to have)
2) Start up Mobile Terminal
3) Type in "su root" minus the quotation marks
4) It will ask for the current password, which is by default "alpine", again minus the quotes
5) Type in "passwd", still no quotes
6) Now you have to type in what you want your new password to be. Bear in mind that this text will not appear on screen, nor will any other character. Also bear in mind that this is case sensitive.
7) You will have to enter in your password a second time to confirm.

A worm that affects certain jailbroken iphones huh? I'd say that something fishy is going on here given Apple's adversity to people 'messing' with their products.

Now people see why not to jailbreak their iPhone. Good thing it dosn't do serious damage. There is no real threat.

Apple will declare this a feature

This would be the best if the Iphone was starting to be targeted by hackers, I cant wait till they start infecting official supported phones.,, I for one am sick of how Apple claims they have no viruses cause there that good , gimme a break ,, the real reason is they have no market share in the PC world so who in there right mind target them ..
But the Iphone is a different story they have huge share in the smart phone market..
I for one would love to see them brought down from there pedestal of smug.

I guess I can only hope . . . . . .

Mac OS is unquestionably, inherently more secure than Windows. Vista & 7 are game changers though, so good for Microsoft. There have been viruses too, but after servicing thousands and thousands and thousands of PCs & Macs, I've never actually seen one in the wild.

The iPhone is SO frickin' locked down -- even to the users themselves -- that a truly damaging virus is unlikely. I know there are plenty of exploits for the iPhone OS, but taking advantage of them via WAN without root access is going be awfully challenging.

The reason we see a 'virus' (which only changes the background..) on jailbroken phones is because the people who were 'bright' enough to jailbreak their iPhone (requires the installation of SSH, a terminal-based, remote access system server daemon) were dull enough to not change their SSH password from the default which everyone knows now (Hint: "alpine").

My first thought on reading this was
"only affects jailbroken phones? Wonder how long it took Apple to find that hole and write the worm"
So ya....

Way to go Apple...