iPhone wont connect to BT home hub anymore - why?

My iphone (3GS with OS4 download) used to connect to my BT Home Hub with no problems (hence no internet charges at home when using my phone) but for some reason now it will not connect. It can see it, but when I put in my password (and I've tried the network key and the password) it says 'unable to connect' and that's that.

Any idea why? Have tried re-setting router (both with reset button and the little hole you have to poke with a pen) and its getting really frustrating now!

And ... it says I can connect to BT Fon .. is that free?

Thank you!