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It sounds like we might not be talking about the same thing, so I'll go into more detail. Sorry if this is stuff you already know.

Before iOS 4, there was no good way to handle local notifications on the iPhone. Some developers tried using push notifications for this functionality, but that doesn't work very well because it requires constant network access (a server is responsible for tracking alert times and sending notifications to mobile devices). So any time you don't have network access, you won't get your alert until you have network access again — not good, especially on an iPod touch, which is about 40% of potential OmniFocus users.

So the Omni Group came up with the rather clever idea of writing out all your OmniFocus due dates to a .ics file, which is a standard calendaring format recognized by iCal on the Mac and the iPhone's Calendar app. That file could then be uploaded to your OmniFocus sync server. Then the iPhone's Calendar app could subscribe to that .ics file and download the due dates as local calendar events with alarms. So other than occasional syncing with the server to get new or changed due dates, all the notification data is stored locally on your device. When an OmniFocus item is due, the iPhone Calendar app triggers an audible alarm and pops up an alert window.

This workaround may seem a bit convoluted, but it was the best we had prior to iOS 4. Now in iOS 4, Apple has provided a facility for developers to handle true local notifications, obsoleting the .ics file syncing business.

However, Omni left in the old .ics file syncing to support older devices and users who chose not to upgrade to iOS 4. So you can still use the functionality, at least until Omni gets a chance to polish their iOS 4 local alerts a bit more.

To enable the old notification feature, go into your OmniFocus settings screen (tap the gear icon in lower right corner). Under the "Dates" heading, you should see an option for "Calendar Export". Tap it and carefully follow the instructions. Be sure to subscribe to the exported calendar file with the Calendar app when OmniFocus prompts you to do this.

If you've got everything configured properly, you should see a new calendar in the Calendar app with all your OmniFocus due dates. Now, whenever you add or change a due date, and both OmniFocus and the Calendar app get a chance to sync with the server, you should have a calendar event saved locally on your iPhone/iPod .

Hope this helps.

-Dennis