Previously, Genius Bar staff had some flexibility in waiving the $199 out-of-warranty replacement fee as a "one-time exception", giving customers a free replacement for a damaged phone. With the shift to AppleCare+, Genius Bar staff will no longer have the option of offering free replacements, so customers who have been aware of Apple's informal replacement policy should be mindful of the change.
AppleCare+ for the iPhone extends repair coverage on your device to two years. AppleCare+ covers two incidents of accidental damage for $49 per incident.
There is some confusion as to whether the AppleCare+ program must be purchased at the time you buy your iPhone or whether it can purchased during the first year of ownership. MacRumors notes that although Apple's iPhone and AppleCare pages are clear that AppleCare+ "must be purchased together with your new iPhone", the legal text of the AppleCare+ Terms and Conditions (PDF) indicates otherwise: "You must purchase the Plan while your original iPhone is within Apple's One Year Limited warranty."