This interview with Danish professor Gert Frølund Pedersen from Aalborg University’s Department of Electronic Systems was posted two weeks ago, on June 10:

“The human tissue will in any event, have an inhibitory effect on the antenna. Touch means that a larger portion of the antenna energy turns into heat and lost. This makes the antenna less efficient to send and receive radio signals,” says Gert Frølund Pedersen.

Researchers at Aalborg University have demonstrated that touch will reduce mobile antenna efficiency to a great degree. Antenna effect may be reduced by more than 90 percent if you hold tight on your mobile phone where the antenna is located.

From the article Is the iPhone 4 born with antenna problems?

Users all over the world are now reporting up to 90% loss of antenna signal when holding their iPhone 4 devices, just as Professor Gert Frølund Pedersen predicted two weeks ago. Gizmodo has assembled a page where users send in movies of how their antenna signal drops when they hold it in their hands. Check the video below for just one sample movie.

To work around this issue you can buy one of the official Apple iPhone 4 bumpers that do just one thing – protect the antenna from being touched. My guess is that Apple know about this issue but had come too long into the design process to change the antenna design, and instead chose to release bumper plastic to cover the antenna from being touched.

**Update** After some testing Engadget posts that the issue occurs only when you hold your hand over both the WLAN/Bluetooth antenna and the 3G antenna in the bottom left corner of the device. The issue is 100% reproducible and using a bumper cover will prevent the issue from happening:

One iPhone 4 demonstrated the issue everytime it was held in our left hand (as a right-handed person is apt to do) so that our palm was essentially bridging the two antennas. If we had to guess, we’d say that our conductive skin was acting to detune the antenna — in fact, we’ve already managed to slowly kill two calls that way so it’s not just an issue with the software erroneously reporting an incorrect signal strength. That said, we had no issues when Apple’s $29 rubber bumper accessory (given to us free for standing in line) was attached, creating a buffer between our palm and the antennas.
From Engadget