According to Ars Technica, Apple released the second beta of iPhone OS 3.1 to developers last night. Labeled build 7C106c the new iPhone software beta is said to give developers the ability to do limited development over WiFi instead of being limited strictly to connecting their phones via USB.
A source speaking to Ars called the feature "huge for developers" noting that freeing up the USB port during the development process would add convenience. Apparently Apple has warned developers that USB will be faster and is somewhat more desirable because it draws less power than WiFi. A pre-install advisory notes that applications cannot be installed from Xcode nor can debugging be done over WiFi.
TUAW adds that Apple has closed the IPCC tethering hack loophole in the new version of the OS.