This is for the new iOS 5, with the lock screen camera.
Did you know that you can get past the unlock screen without a password by just double clicking the home button, going to the lock screen camera, then going to the photo gallery, and then hitting the home button? After that you're taken to your normal app home screen that makes it seem like you input the password.
iPhone 4, iOS 5, Circumventing the Password
Yes, it will bypass the slide to unlock. No big deal.
And No, it doesn't work the way you describe if you have passcode lock ON.
I have iPhone 4S and IOS5.0.1.
No big deal? It DOES work if you have a passcode lock with a delay (i.e., not immediately). So if I want the delay so that it's convenient for me to get in quickly without a passcode after just a minute or so, but I want it to lock if it's sitting around for a long time (e.g., sitting on the desk at home or I lose it), I'm screwed.
The whole point of the delayed lock is that it's actually locked. If I wanted the camera to be able to bypass, I wouldn't bother locking the phone.
Getting Past the Lock Screen on the iPhone 4
