Apple has just issued the 4.0.1 iOS update, which now includes a new formula for displaying reception bars.
This updates doesn’t really fix the route problem that the phone has, just displays the bars a little differently. This new formula is supposedly the way AT&T recommends and doesn’t actually improve reception. Apple reported that the algorithm was to blame for dropped bars while holding the iPhone, and this is suppose to show you the actual bars…rather than what it was showing before. Which has me a little confused, either way it’s recommended that you upgrade your iPhone as soon as you can by plugging it into iTunes and checking for updates.