The problem purportedly stems from the placement of the cellular antenna. Tucked behind the only plastic part of the phone, the antenna hangs out down near the bottom of the rear side of the device – right where your hand goes. On a table, the handset might get great signal; pick it up, and the signal gets lost in the meat of your palm.
Unfortunately, the only solution for the time being is to contort your hand into a cramp-inducing position to hold the phone from the top, which doesn’t exactly mesh well with typing on the QWERTY keypad. Got a Nokia E71? Let us know how the reception is down in the comments.