Despite your best efforts, you know that it's lost forever and now, insuring your data security becomes an urgent concern and immediate priority.
You don't want your contacts, passwords, pictures, messages, emails, apps and personal information falling in the wrong hands. The same goes for any financial, medical, legal or identity information stored on your iPhone as well (all of which can be easily misused).
And while you're at it, you most definitely don't want the thief to be able to use your stolen gadget, ever again -- or profit from your loss.
If you have iOS 7 then, in addition to being able to remotely wipe your iPhone (using iCloud), you can also lock it up permanently so that the thief can't use or sell it.
Anyone who then tries to activate your stolen iPhone will not be able to do so because only you have the Apple ID through which you remote-wiped your device.
In this respect, updating to iOS 7 gives you far better control over the security of data stored on your iPhone than, say, iOS 6.
This hardware/software protection (device lockdown) continues to function through iCloud and your Apple ID/password combo even when your iPhone is lost forever.