If the phone is sitting face up, and starts ringing, and you flip it over on to its screen, then the ringer is muted. If you pick the phone up, the ringer gets quieter but does not mute. Both of these are in the settings and you can decide to enable them or not.
EDIT: It looks like maybe only the "quiet ring on pickup" is an option, the other one (flipping it on to its screen to mute it) must be always enabled. From the home screen, hit menu > settings > sound & display > "Quiet ring on pickup"
Also note that if the phone is face up and it starts ringing and you turn it over to mute it, this is only for that one call. If you get another call it will still ring, so after it's muted, you might want to flip it back to being screen up so that if you get another call you can easily see who's calling and/or flip it over again.