If you have modified you iPhone in anyway before the release of 1.1.1 Firmware and need to restore if for whatever reason, there is a solution for you without upgrading to the latest firmware.
PC users can hold shift and click the restore button. iTunes will show you the firmware you want restore. Select the firmware that is currently on the phone (1.02).
Mac users hold down the option button and click restore. iTunes will bring up a window to select the firmware file you would like to use.
You can find the old iPhone firmware on this site.
PLEASE NOTE: IT IS NOT POSSIBLE TO DOWNGRADE YOUR FIRMWARE YET!! IF YOU UPGRADE TO 1.1.1 YOU WILL NOT BE ABLE TO GO BACK!!