The 2nd code listing shown by Fallout is the recommended method. It basically allows you to set the physics simulation running on a separate thread. This will help to increase performance gains when using the hardware and when dual core is also present.
Passing in a value of 0 to phy update will cause the simulation to start whereas passing in a value of 1 to phy update will update all objects in the scene using the physics data.
In the code listing you start the simulation processing outside of the main loop and then inside you get the data and then continue simulating. By breaking it up in this way it allows the simulation to be processing while other things are going on.
One thing to realise when using this approach - if you want to create any new rigid bodies or other physics objects or set properties etc then this has to take place inbetween the calls to phy update 1 and phy update 0 e.g.
phy update 1
` apply forces to rigid bodies
for ID = 7 to 1200
phy add rigid body force ID, min + rnd ( max ), -100 + rnd ( 200 ), min + rnd ( max ), 0
next ID
` update the simulation and screen
phy update 0
