Since upgrading my iPhone 3GS to iOS 4.1, I've periodically seen 1 bar or "Searching…" at home and work where I used to have 4 or 5 bars. And I've sent text messages with 4 bars, only to have it immediately drop to 1 and the text message error out.
I'm trying to learn if I'm alone with this issue (and should therefore bring my phone to my local Apple Store—after trying a restore just so I can say I did when they inevitably suggest that), or if this is a common problem (and we should then file bugs at bugreport.apple.com).
Update (to answer Louis Gerbarg's question): I've installed every new update, so I believe I upgraded from 4.0.2 to 4.1. I think I noticed Apple's bar display calibration changes after the 4.0.1 upgrade, though the difference was subtle. I did not have dropped call problems and errors sending text messages until the 4.1 upgrade.
Update #2: I restored my iPhone to factory defaults (but still with 4.1 installed), and still had the problems. So I took it to my local Apple Genius Bar and explained this, and they exchanged the phone for a new one. The new iPhone 3GS had 4.0.2. But I still don't have the problems after installing 4.1. This must have been a hardware issue.
Best Answer
Did you move from 4.0 to 4.1, or from 4.0.1/2 to 4.1? Between 4.0 and 4.0.1 Apple changed the calibration of the bar display, such that at a given signal strength it shows a fewer bars. They did that in response to the iPhone 4 antenna publicity, but the changes were done for all devices that support 4.x.
So, if you went straight from 4.0 to 4.1 getting fewer bars is expected, though if you are dropping calls where you previously didn't that is a real issue, or if you updated from 4.0.2.