This question discusses encrypting data on the iPhone using the crypt() function. As an alternative, is there a keychain on the iPhone and if so, what code would I use to access it in order to store login details and then retrieve them for us in an application?
One other thing to note: the keychain APIs don't work in the simulator when using older versions (2.x, 3.x) of the iPhone SDK. This could save you a lot of frustration when testing!
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