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We've looked at several other iPhone tethering methods in the past, but the app we're going to use today—called PdaNet—stands head-and-shoulders above the competition both in ease-of-use and functionality.
NOTE: As soon as AT&T begins to sell the wireless tethering service, they may or may not start cracking down on unofficial tethering. For my part, I have tethered a few times (just to test, I promise!) and have never seen an extra charge on my bill. On the other hand, I doubt my meager usage attracted much attention. Either way, proceed at your own risk.
What You'll Need
To get started, you need just a few things. Most importantly, you'll need a jailbroken iPhone (2G or 3G) with a data plan. If you've haven't already jailbroken your iPhone, grab a copy of the PwnageTool or WinPwn and follow the simple jailbreaking wizards. (If you want a little hand-holding, we've got a guide for PwnageTool here and one for WinPwn here.)
All jailbroken? Good. Now assuming you've got a laptop, let's get this party started.
Install PdaNet
Create an Ad-Hoc Network
This is the most complex sounding part of the setup, but it's actually very simple. Your laptop is capable of creating an ad-hoc wireless network that allows data to pass between it and the device that connects to it. In this case, we're going to create an ad-hoc network between your laptop and your iPhone so that your laptop can use your iPhone's data connection. Simple enough, right?
Setting up the ad-hoc network varies depending on what operating system you're using. On OS X, it's a breeze:
That's all there is to it. It's a little more complicated if you're on a Windows laptop, so here's how to set up an ad-hoc network in XP and here's how to do it in Vista.
Ladies and Gentlemen, Start Your Tethering
What Else Do You Need to Know?
PdaNet stands out among its competition because—unlike the other methods we've seen—once you're rolling with PdaNet, every application on your computer has full access to the internet. Most other methods set up a SOCKS proxy, so only applications supporting that proxy will work. PdaNet runs in the background, so you can leave the application running and do other multi-tasking on your phone if you need to.
The one thing you need to be particularly aware of when using PdaNet is your battery. While running, PdaNet will suck the energy from your battery with the vigor of an aggressive teenage makeout session. Even with my phone plugged in and charging, I still see a net battery drain overall. So plug in your iPhone while you're tethering or your phone will die quickly.
Other than that, PdaNet works like a charm. I called this method the easiest setup, and although the steps may look fairly involved, once you learn to set up the ad-hoc network on your laptop, it takes under a minute to get your tether on.
Whether you've been using PdaNet or another tethering method, let's hear more about your experience in the comments.