My iPhone 4 developed bright white spots on the display over the last few months. These spots are the same as those described in an Apple Support Communities post. As the original poster describes, the spots were especially visible when the phone displayed a white background. I had learned to live with the occasional imperfection as the spots had developed over a time. However, the spots appeared to become bigger in recent days.
I’ve had the phone since “Launch Day” in June 2010, but I am still covered by AppleCare so I took it to my local Apple Store. A Genius inspected it and, without hesitating, offered to replace the phone. He said that the display was the problem and since there is no way to simply repair the screen, he would have to replace it.
If you are still covered by the one-year manufacturer’s warranty or by AppleCare, take the phone to your local Apple Store. Chances are good that they will replace your phone or at the very least repair it. Of course, your mileage may vary.