I found a support article (
http://support.apple.com/kb/HT1664) tried the steps, and confirmed that turning the iPhone off and on again seems to fix the problem.
1) I started an mp3 playing and went to the extremes of my house without the audio breakup.
2) I put the phone in my holster, walked around vigorously; no breakup.
Thanks for the feedback and working solution.
On re-reading the previous post: I didn't do a reset. I turned it off and on. (This iPhone 4 hadn't been off since I bought it about 3 weeks ago.)
But it's a solution.
Message was edited by: LeeJiPhone