The secret is that this isn't an ordinary rubber band; it's the wide, super-strong rubber bands you see strapped around bushels of produce like broccoli in the produce section of the grocery store.
Grab one of those the next time you shop for groceries, then stretch it around the outside of your phone (if there's printed text on one side of the rubber band, flip that side in. Or don't. Whatever strikes your fancy) for an easy and inexpensive no-slip grip.
And if you're using an iPhone 3/3G or iPod Touch with the curved back, like Tim is in these photos, you can still access the charging and headphone ports while the rubber band grip is on. Check out Tim's post on Instructables here.
(Images: Tim Wikander/Instructables)