The new iPhone 3GS has arrived, and I've had a chance to put it through it's paces over the last couple of days. I definitely recommend it - especially if you can get the upgrade pricing - and be sure to check with an Apple store for in-stock availability, because AT&T stores are currently backed up at least a week.
The first thing I did when I upgraded was to copy everything from the old iPhone 3G to the new 3GS. This included all the apps I had purchased, and all the music, photos, contacts, email, notes - the whole enchilada.
Overall the process went fairly well, and I'll rate it a B+ in spite of a few gotchas along the way.
Here are the steps I took to backup my old 3G and restore the new 3GS from the backup. These same steps can be followed to fully backup an iPhone 3G (and you might realize after reading this article that the backups you've been doing have not been backing up your purchased apps).
1. Backup the old iPhone 3G
Connect your iPhone to your computer with the USB data cable and open iTunes. Wait for it to recognize your iPhone, and then right-click on your iPhone in the left side bar. Select "Backup" from the short-cut menu to start the backup.
The first backup took about 20 minutes on my iPhone, which was loaded with about 4 GB of data. I say first, because I ended up having to do it again because the first run didn't backup my purchased apps nor my music files.
Instead, I received an error message indicating that not everything was transferred, and that my computer wasn't authorized to play the items (even though I had already authorized my computer).

Turns out you have to tell iTunes to transfer purchased apps from your iPhone to your computer, and Apple didn't put the menu option in a prominent location.
2. Transfer Purchased Apps
When you purchase apps from your iPhone, they aren't included in the iTunes backup. You have to right-click on your iPhone in iTunes and select "Transfer Purchases".

This copies over all of your purchased apps into iTunes, but they still wont' be part of the backup unless you select them.
Select your iPhone in iTunes and then click the "Applications" tab, and make sure that all of the apps are selected. Do the same thing with the Music and Videos tab, and make sure all of your songs and movies are selected.
Very important: Run the backup one more time to backup the apps, music, and movies we just selected.
3. Restore from the Backup
Now we're ready to transfer everything over to the new iPhone 3GS. Unplug the old iPhone and connect the new iPhone. Wait for iTunes to recognize it, and you should see it show up on the left sidebar just like the old one.
Right-click on your new iPhone in iTunes, and select "Restore from Backup". Choose the option to "Restore from the backup of" the old iPhone.

Important: Once the backup has finished, do one last sync and be sure to select everything you want transferred over (apps, music, etc).
This will copy everything over from the old iPhone to the new iPhone, including email accounts, contacts, photos, apps, etc. It won't delete any of the new iPhone 3GS apps either, like the new Compass or Voice Memos.
Gotchas:
I had to go in an enter passwords for the email accounts - those weren't transferred over, which actually makes sense from a security point of view.
Same thing for Wi-Fi networks. It didn't save my work or home Wi-Fi network settings, so I had to reconnect to them and re-enter the passwords for those networks.
Other then the hassle of transferring purchased apps and making sure everything was selected for the backup for Music, Applications, Videos, etc - this was a fairly smooth process that only took about 2 hours all together from start to finish.
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Anonymous (not verified) Says: Wed, 2009-07-08 20:35
Hi Ricky,
This was a very helpful article.. I had the first generation iPhone and just received my new 3GS.. So I am ready to backup, restore, transfer my music and applications, etc.. However, here's my dilemma.. The laptop that I synced to is gone, stolen (along with some important personal items, but I won't go there).
So without the original music and apps contained in my iTunes (only on my old iPhone) is there any way that those can still be transfered to my new 3GS?
please let me know if you can help me!
Many thanks,
Chris
Ricky Says: Thu, 2009-07-09 03:20
Sorry to hear about your laptop getting stolen!
If you still have your old iPhone then you should still be able to back it up on your new/other computer, and then can restore the new 3GS using the steps described above.
blmoffett (not verified) Says: Fri, 2009-07-24 20:32
Hi, I was in the middle of setting up my new Iphone 3GS from the backup of my first generation iphone... I had to stop in the middle of this sync, and when I went back to finish, I didnt have the option to finish what I had started. How do I make the new phone restore from backup? Thank You.
Jonmcw (not verified) Says: Sun, 2009-07-26 08:07
Great article.. thanks! Do you know if this will work with an unlocked&jailbroken set? Trying to transfer my old 8gb setup to my new unlocked&jb 3gs. Anything I should watch out for with the backup process that you know of?
Anonymous (not verified) Says: Wed, 2009-08-05 12:51
thanks for the info, you helped so much.
David (not verified) Says: Mon, 2009-10-05 20:16
Thanks from Australia. I just got my new 3Gs and found your page. 30 minutes later, it all looks fine - so thanks for the information. It worked a treat.
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