For what it's worth, I had my 3 month old 3GS replaced at the local Genius Bar yesterday. It came out of non-retail box in a drawer. I asked the Genius if this was a refurbished phone and he said, quite pointedly, "It is not refurbished, it is rebuilt." Being a bit wary, I used the term "refurbished" again in our conversation and he corrected me.
Being not completely convinced that the phone had a hardware rather than a software problem (it was one of the many that would loose all phone services after the 3.1 update), I'm still not totally happy about the replacement. Its battery was almost totally flat (not the ideal way to store a Li-ion battery). However, it did only have 3.0.1 installed, so I was able to set it up as a new phone and not restore the dreaded 3.1 update. Even though this was a long and tedious process (done once before the previous evening while on the phone to AppleCare), I do feel a bit safer with the pre-3.1 OS.
I know it's just semantics, but I would be interested in hearing if anybody else had a conversation like this with an Apple employee.
-Ric
Yes, Apple Store employees do like to call them "rebuilt" instead of "refurbished". When I had my 3GS replaced last week, the "Genius" corrected me when I called it a refurb.
However, if you buy a refurbished iPhone from AT&T, it truly is refurbished. AT&T does not rebuild and thoroughly test the iPhones that they sell as refurbished (usually they are repackaged used iPhones that people have returned within the first month of having it). They just clean it up and put it in a box. I've read reports of people receiving refurb AT&T iPhones that have had old owner content on them, or have had fingerprints on the screen and back.
From my experience, the refurbs (or rebuilds) I have received from Apple have worked better and have had better build-quality. The 3GS I have right now is built better- the bezel is more flush with the back, the power button is easier to press, and the ringer on/off switch is tighter.