Well, i wass bound to happen. I keep my iPhone in my pocket unprotected all my waking hours. I've had my 3GS for five months and when I pulled out out of my pocket the other day, I discovered that the glass screen has been cracked. I was horrified, but luckily the phone continued to work fine as only the glass was broken and not the actual LED.
When it first happened, I thought to myself... her goes $50! Boy, was I wrong. I called the local Apple Store to inquire about the cost of replacing the glass screen and was shocked when they told me it was $199! Ouch! That's exactly how much I paid for the whole thing (granted with a two-year term commitment with AT&T) so refused to do it on principal. At this point, I had two remaining options:
1. Buy the parts and do it myself. so I decided to try to do it myself by purchasing the relevant parts. There are plenty of videos online that show you how to (and how not to) do this yourself. The parts cost between $30 and $50. I watched one video and decided that it was not for me, even though I had replaced a BlackBerry screen recently for my wife without any problems. The iPhone was just too complicated.
2. Use a third-party to do the replacement. I found several places online that offer screen replacement.
I decided to use http://www.iphone3gscreenrepair.com/ primarily based on their web site. They offer a variety of services related to the iPhone screens. The cost is $89.99 for the 3GS glass replacement ($69.99 for the 3G).
If FedExed my phone over to them and the phone was returned back to me in a couple of days (they shipped it back the same day they received it, which was impressive).
There are to disadvantages to the approach I took, even though it saved me about $100:
1. My Apple warranty is now voided becuase the phone has been opened by someone other than Apple. If your phone is too new, I would recommend voiding the warrant as you might run into other problems with the phone and Apple would not help you at all in that case.
2. I did not have my phone for a few days, which was annoying. I had taken my SIM card out and put it in a BlackBerry. I was partying like it was 2001!
One last thought if you go with my approach and ship your phone to someone to do this: make a back up of your phone (using iTunes) and erase everything (Settings -> General -> Reset) before you ship it so your information (contacts, emails, documents, etc) are not being shared with strangers. Once your phone comes back, you can restore it to the way it was using the iTunes backup you made earlier.