The iPhone has a hardware mute switch, which lets you quickly and easily turn the ringer off and put the iPhone into vibrate-only mode. It’s located on the left side (facing the device) directly above the volume rocker. When the ring/silent switch is in-line with the volume rocker, the ringer is on. When the ring/silent switch is offset from the volume rocker, the ringer is muted (and only vibrate is on).
A bell will flash briefly on the screen when the ringer is on, a bell with a line struck through it will flash briefly when the ringer is muted.
(Note: the iPhone will still sound alarms, play iPod music, and allow apps like games to make sounds even when the phone is set to silent)
