Does every iphone come with AppleCare? What does it cover?

Every iPhone comes with a one year warranty for manufacturer defects, they do not cover damage.

If you purchased AppleCare+, it excends the warranty to 2years and provides for 2 instances of replacement not covered under the warranty for a reduced price.

To expand on Diesel Vdub's response:

All apple products come with a 1 year limited hardware warranty, and 90 days of complimentary phone support.

AppleCare increases the 1 year limited hardware warranty to two years (from the date of purchase), and provides access to phone support for the same time. (The 2 years is specific to handheld devices).

AppleCare + gives the same benefits as AppleCare AND provides 2 instances of accidental damage replacement at a discounted rate.

AppleCare+ has to be purchased within 30 days of device purchase.

AppleCare can be purchased anytime in the first year (essentially, while you still have limited warranty).

The base one year warranty covers defaults in materials and assembly only. The warranty does not cover accidental damage, abuse, or cosmetic damage from normal use.

AppleCare+ extends that base warranty by an additional year. The two accidental damage claims each cost $49 per claim as well. AppleCare+ must be purchased within 30 days of purchasing the iPhone.

Base iPhone warranty info:

http://support.apple.com/kb/index?page=servicefaq&geo=United_States&product=ipho ne

AppleCare+

http://www.apple.com/support/products/