First of all, the constant references to News of the World "phone hacking" are a little misleading. From what I can gather, News of the World agents didn't actually intercept anyone's calls or plant spyware on phones. Rather, they invaded voicemail accounts to gather private information.
The dirty deeds were pretty low-tech. Some perpetrators used a technique known as pretexting. Pretexting is simple; I call your phone company and pretend to be you. Your phone company gives me the information I need to access your voicemail. Now I can hear your messages. Others may have dialed into voicemail accounts by simply cracking weak passwords.
Real, live phone hacking is relatively easy, though. Provided you can gain physical access to the phone you want to spy on. Many inexpensive applications allow you to remotely listen in on phone conversations, and even turn on the phone's speaker or camera to do a little eavesdropping.
There's another good reason to password protect your smartphone.