Interesting. The iPhone has liquid indicators placed on the
outside; one near the bottom connector, and the other on the edge of the headphone jack.
Manufacturers usually put these on the inside (ie. the circuit board). Apple of course, has them there too.
Seems that if any of these indicators turn red, the warranty is void. Problem is, palm sweat can turn the outside indicators red. Seems Apple is pretty eager to void folks' warranties:
YouTube - BBC Watchdog - iPhone water damage indicator issue