"Water damage" at Apple includes but isn't limited to : Corrosion, color change in any tracks or solder on the board and marks in the glue that holds a few things together
if and only if the liquid indicators are bright pink. Notice that the liquid indicators are not the first thing checked. And this is only in the case of someone saying "My iPhone is ******, it thinks it's docked", for example.
It will void the warranty only for the electrical parts. A cracked screen, even with extensive water damage (ie. all indicators deep pink) will warrant an immediate replacement of your iPhone.
Also, I said it
could, that is,
given enough sweat. The point is, and I quote :
Quote:
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There has to be a certain quantity for the liquid indicators to change color, much higher than what is excreted by the palms of any person I know.
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I've even seen a few iPhones get replaced with electrical damage due to corrosion. One had its jack indicator white, the dock one slightly pink.
If you get into an Apple Store without giving the guy a hard time, you can pretty much get anything repaired.