Many of my customers are requesting passcode removal of their iPhones. The true sense of removing it is by wiping it to factory defaults. How will you do a factory reset when you doesn't remember your passcode? By so doing, it will wipe out everything on your iPhone: contacts, sms, etc.
1. Connect your iPhone to your computer using the usb cable provided, but make sure that iTunes is installed with the latest version.
2. Turn off your iPhone.
3. Press and hold both the home button and the power button until an apple appears on the screen.
4. Follow the prompt on the display and the phone is ready again. It will be recognized by iTunes too.

On the contrary, you don't need to do the factory reset if you have done a precaution to your precious iPhone. Enable the automatic deletion of passcode after consecutively typing your passcode 10 times incorrectly. By default, it is set to off. So how?
Go to Settings > General > Passcode Lock. Turn it on!