Prior to this week, Apple wouldn't offer any value to water-damaged iPhones (or any other device) that are traded in under their "Reuse and Recycle" program. However, rules have changed with the company, and they are now allowing devices with water damage to be exchanged for an iTune's gift card.
There are still going to be restrictions depending on how severly damaged the devices are, but there will be value provided to some extent. Many people are wondering how Apple will know if the device has been in contact with any water, and yes there's a way to tell!
Each device has a visible "liquid contact identicator", which is usually white or silver if there has not been any water damage. If there has been water damage to the device, it will either turn partially or fully red. This will allow Apple to determine the severity of the damage and how much value a person will get back for the device.
According to Mashable's report, there is quite a difference in how much you'll get back for water-damaged vs. non-water-damaged devices. They are saying about $120 difference, ouch! But hey, at least they're allowing the possibility of a refund - every penny helps!
If you have any unused iPhone's or other Apple devices, water-damaged or not, make sure you check out Apple's Recycling Program!