The original claim by Apple was that no outside parties could read iMessage chats because the messages were encrypted on one device and not decrypted until they hit the receiver's device. However, on Thursday researchers from QuarksLab put on a presentation called "How Apple Can Read Your iMessages and How You Can Prevent It." The team apparently reverse-engineered iMessage and found that the encryption used is extremely strong and could probably only be cracked by exploits available only to agencies like the NSA.
But, the team also says that because Apple controls the entire infrastructure, it could potentially set up such an exploit fairly easily and be able to read your messages. Of course, Apple was quick to jump on this claim and released a statement to AllThingsD saying:
So, theoretically, Apple could read your iMessages if it wanted, but there's no real reason why it would want to. We can't really see any benefit to Apple breaking its own security, just like we can't see any benefit to Google screwing over users by exploiting the data that it holds. Protecting user data is good business these days, and we think these big companies understand that.
source: Ars Technica & AllThingsD