Phone hacked??

I'd doubt the phone is hacked. Have you jailbroken it?

UNLESS they hacked your iCloud password.

Could it be a tricked a web page to give you a popup or some kind.  

I could be mistaken (obviously I don't have the phone in my hands).

Can you double-click the home button and see if that does anything?

My mom had something weird similar once, I was out of town so I didn't get to see it. But it wouldn't go away even when she quit it in Safari(?) or whatever app she was in and was accessing the web.  BUT eventually (a few hours) I think the box timed out and went away. 

@kstuart14 Does the screen say "Lost iPhone" on it?

If it does, it migght be hacked from the iCloud end.

Can you go to http://icloud.com/ and log in?

This exact same thing is happening to me right now! I am livid! I dont know what to do and if somebody could tell me itd be much appreciated!!!

Its an Apple iCloud issue they hacked your account from a website like they were you and you had lost your phone.  I got lucky and while my iPads got locked my phone had a pass code so it was safe.

Warning this delete all your data but you will get use of your device back. ALSO you must have access to your iCloud account that the iOS device was originaly setup under or you will not get access.  

You have to pull up iTunes on your computer.

Turn your iOS device off and disconnect from any other device.

Hold the home button on the iOS device for at least 10 sec and KEEP holding.

While STILL holding the button plug in the iOS device to your computer.

It should show the plug symbol and itunes on the screen.

Follow the prompts on iTunes to "Restore" your iOS device.

Can the device be wiped with find my iPhone?

I'm not an iOS guy, but don't these have a "reset protection" function on them, to prevent this?

I found this how-to, seems like a pretty good recovery setup, more or less what @KevDude162 said, but in more explicit detail:

https://discussions.apple.com/thread/6270410?tstart=0

This is interesting though, doesn't iPhone/iCloud require you to set up an account, and put a strong password on it?

@KevDude162 If that iPhone has find my iPhone enabled (which we know it does), it's still going to be tied to that iCloud account, right?

Aren't you going to have the same problem as if you had a stolen phone that you didn't know the iCloud password for? Or don't the hostage guys change the iCloud password? (Which means you could change it after the restore?)

(And if they don't change the password couldn't you just change it yourself and then go unlock your iPhone via iCloud https://appleid.apple.com yourself)

Good old Google..

http://www.securityspyware.com/helpappleus03gmail-com-helpappleus03/

It is NOT recommended to connect to a computer as it may spread the ransom wear to the computer.   Erase the phone with iCloud.

If the screen says "Lost Phone" it's likely that they just hacked the iCloud account password and sent a locked locked "Find My iPhone" message (more like a my phone is stolen and I'm going to lock it down mode, but performed by someone who got into your account).

If that is the case, then there is no ransom wear to spread.  It's getting control of your account.  But if they changed the account password and reset the ways to recover the password, you might be lost.

I would install Malwarebytes, before connecting it to your PC, and enable "rootkit" protection (and allow all the reboots involved, and the initial scan).

If necessary, MWB can do a scan at a PE boot (before the OS is loaded) and make sure you're 100% clean, and then the rootkit protection does a REALLY good job of making sure it stays that way, before and while you connect the device.

It sure looks to me like the iTunes recovery is a decent way to go, but I don't know much about the iCloud account side, I don't have any experience there.

@Clearly, using a strong password AND passcode is essential there, if you get out of this mess, entirely new ones.

I did set up an Apple store account, for my daughter's iPod (we don't have many Apple devices, but I conceded for her;-]), I had to use a fairly complex password, it wasn't messing around, I recall that, because recently she forgot it, and we had a heck of a time getting it ironed out.

@kstuart14Were you able to get into your iCloud account?  I think I'd start there, if it were me, given that it's the least likely to give you grief, and you want to reset all that first, so you don't get your phone fixed, only to have the whole ransomeware loop just start again...

If this were a Windows device, well, we likely wouldn't be having the discussion, all the bootloader checks and timing additions have made a Windows Phone very, very difficult to compromise ;-]