The iPhone's ability to predictively complete the words you type, or auto-correct, is a feature Apple has touted ever since it first introduced the combination iPod and smartphone. Not everyone has been excited about auto-correct as Apple, so the option to shut the feature off was added with iPhone Software 2.2.
Here's how to disable auto-correct once your iPhone has been updated to software version 2.2: Tap Settings Tap General Tap Keyboard Switch Auto-Correction to OFF
You can turn the auto-correct feature on or off any time you want, no need to restart your iPhone.
Even if you like the iPhone's auto-correct feature, turning it of sometimes can be really handy if you are typing specialized terms that your iPhone keeps changing -- or if your messages always include "duck" when that really isn't the term you wanted.