Yes, I do use a passcode. I've been using it ever since my first iPhone 3, and I change it every 6 months or so and I've never forgotten it. If I did forget it, it is stored in an encrypted note on my MacBook Pro's keychain. I keep all my different passcodes/passwords in my MBP's keychain and in an encrypted app (mSecure) on my iPhone (and mSecure uses a different secure passcode to open it).
To my knowledge there is no known way to defeat the passcode lock on the iPhone. Even a simple 4-digit passcode has 10,000 possible entries, so as long as you have not used something easily guessable it is unlikely that anyone will get it in the 10 tries they have to guess with. The passcode lock feature on the iPhone starts timing out after 6 unsuccessful attempts:
6 unsuccessful attempts - 1 minute timeout
7 " - 5 minutes
8 " - 15 minutes
9 " - 60 minutes
10 " - permanently disabled, requires a restore to reset and gain access.
So after 10 failed password attempts, they are locked out until they restore the device in iTunes. If you do it, and you have a backup you can restore from backup (which will also restore the passcode if it was there when the backup was made). Without a backup, the only option is to restore as new, which wipes the device clean and starts it off again as it was new out of the box.
You can also enable the feature where after 10 failed attempts, the device auto-wipes itself out, but the above applies either way - after 10 tries, your only option to get the device to let anyone in is to restore it in iTunes.
Note that while someone was trying to guess the passcode, if the iPhone had the find my iPhone feature enabled, and if it had a data connection (3G or wifi) it would be findable from your iCloud account - someone has to be able to unlock the device to get in to disable find my iPhone (which can be further secured as well by disabling account changes in restrictions, using a different passcode to get into the restrictions settings themselves). They could remove the SIM card which would effectively cut off cellular data connections, but if there was a wifi node available that the iPhone was enabled to connect to, then find my iphone would also still work.