Basically what it does is create a special Safari secured bookmarket from your 1Passwrd data "using 448 bit Blowfish encryption." This special bookmarklet is then synced to the iPhone in the normal way through iTunes. When you access the bookmarklet in mobile Safari on the iPhone it prompts you for your password and then gives you access to your passwords, secure notes, etc. Since it's just a bookmarklet in mobile Safari this should not be affected by any future firmware changes, etc.
The latest 1passwd beta can be downloaded from the Agile Web Solutions Forum.