[UPDATE] iOS firmware versions up to 4.3.3 are also affected. See FAQ with further information about the topic:
The paper highlights risks that accompany losing a locked iOS device regarding confidentiality of passwords stored in the keychain. It presents results of handson tests that show the possibility for attackers to reveal some of the keychain entries. For the described approach, the knowledge of the user's secret passcode is not needed, as the protection provided by the passcode is bypassed.