If you go into an Apple Store, they will replace the iPhone with a refurbished unit or a new unit if they don't have a refurb in stock. They don't bother sending it away. I've seen this done for 2 different people. The replacement phone will have a 90 day warranty.

If you want your exact iPhone back then you have to mail it into Apple service and pay the additional shipping fee.

In addition to Apple, there are places that you can go to or mail your phone to that will do it for a bit less. I would check Yelp! and Google to see if there are any in your area that are recommended. MacRumors and Apple forums are good for info too.

I have no idea what they will do if Apple gets a jailbroken iPhone. I'd do some web research.