The final step of upgrading the iPhone to the new 3.0 operating system is failing, as it appears that the iTunes Store has collapsed under the weight of millions of phones trying to authorize at once. (Complaints are trending on Twitter by the hundreds.)
Without the final authorization from iTunes, the new firmware doesn't activate—bricking the iPhones and leaving them only able to make emergency calls. I know this, because I'm staring at my own bricked 3G.
It is advised to wait a few hours for the store to come back online before upgrading if you want to, you know, use your phone.
Update: And mine just activated. I had to unplug and replug about half a dozen times.