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I had an iPhone on loan from a friend to try it out and now I need to give it back. How do I make sure that everything is erased from it? SMS, Calendar, Phone Logs, contacts?

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I'd also add a question about how secure this erase procedure is... (i.e. is the data still stored on the phone's hard drive or not?) – Senseful Jul 20 '10 at 7:44
No, the Erase All Content and Settings option scrubs the flash drive completely. That's why it takes quite a while to finish. In early versions of the OS it only did a delete which left the actual data on the drive, but that was changed in OS 2.1 or 3. – DougC Jul 20 '10 at 21:05
up vote 16 down vote accepted

To erase everything and restore the iPhone to the factory state, go into Settings, then General, then Reset. Press "Erase All Content and Settings". If you have a passcode, you will be prompted to enter it. Select "Erase iPhone" and the wipe will begin. Be sure to have your iPhone connected to a power source as the erase takes a long time. When it's complete, the iPhone will have no SMS, calendar, phone logs, contacts, etc.

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On iOS devices that have hardware encryption (iPhone 3GS and up, 3rd generation iPod Touch and up, iPad), wiping the phone is nearly instantaneous, since it only has to overwrite the encryption key for your data to be inaccessible. – Dan Udey Sep 17 '10 at 6:15

You can achieve this with a restore in iTunes. It will restore the iPhone to it's factory state, after which you can optionally restore from a backup. Here is a summary and guide from Apple on the subject.

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