I recently upgraded my iPhone 3GS to the latest version of iOS ( 4.2.1 (BC148a)). After the upgrade I saw that the clock of the device displays the time in my timezone one hour behind the actual time.

I had set to automatically adjust the time and show a 24h clock as displayed in the screenshot.

After switching to manually setting the time, the device now shows the correct time.

I can reproduce the error.