Seems like Apple put the algorithm in place via OS 2.1 update back in '08. http://www.newsoxy.com/technology/apple-iphone/article11156....
If you don't remember, back then every blogger was saying things like "my signal has improved drastically with this update!!11!!1one".
AT&T's recommendation = more accuracy and less reality distortion. (Look at the graph Gruber linked to for what iPhone 4 currently uses for algorithm -- ~50% = 5 bars: http://fscked.co.uk/post/754590440/this-infographic-hopefull...)
Next update, you should see OS 2.1's 3g signal update reversed to what it used to be. Let's hope they fix the bigger (read: REAL) issue related to the proximity sensor that actually kills calls.