What do you do? There are three options for you
1. You could call Apple and they’ll charge you $200 or $250 depending on the capacity of your iPhone. They do not cover physical screen damage in their warranty. The screens are the same for both capacities (4 and 8 gigs) but they make money off you that way. But if you’re not in the States, you’re not going to get it done.
2. You could choose to buy a screen and digitizer for roughly $250 dollars and try to replace it yourself. The process is risky and could permanently damage your iPhone if you’re not super careful and use the exact tools mentioned.TechKnowSpace does it for $209 in Canada in 90 minutes. Most of you will think you could just buy a new phone. Don’t! A new phone may set you back as little as $450 (US) to $700. It’s worth getting the screen replaced. You could choose to replace it yourself by ordering the product at PDA Parts and follow this video to disassemble your phone:
Note that this video only shows you the disassembly not the reassembly.
Alternatively, you could purchase the stuff from iFixIt which also provides other parts for the iPhone.
3. You could go out on a limb and try to replace the screen yourself for about $5, although the price may vary slightly. You may find that tutorial at Ars Technica.
UPDATE: The Ars Technica tutorial is pretty hardcore. You might not want to do it. I destroyed my phone completely trying to do what it said.