Back when the iPhone SDK first became available, the fake iPhone bordering the simulator gave that extra thrill reminding everyone that yes, we were in fact making software for the iPhone. That initial excitement has long worn off, but the device border is still there. My workaround has been to run the simulator at 75% scale, which also hides the device border, but that stopped working after jumping on the Retina Mac bandwagon last month. Since the iOS Simulator adopts the scale of the Mac's screen, running the simulator at anything but 100% results in a tiny window. Unfortunately this also means the useless device border is back.
Thanks to a couple of hours of digging around with class-dump, otx, and lldb, the clutter of fake iPhones and iPads is gone for good. The iOS Simulator's title bar has also gained an orientation status, as I have a tendency to forget which way is up (and who can ever remember the difference between landscape left and landscape right?).
Borderless simulator bliss is now just a SIMBL plugin away. You'll also need a SIMBL injection tool, such as EasySIMBL.