The iPhone dev team released the iPhone 3G unlock aka YellowSnOw on the new year. The initial version had a few hiccups for some users. However, they have released a new version which seems to be working fine for most users. The steps are broadly classified as:
The above steps are clearly illustrated by crunchgear in the article here: http://www.crunchgear.com/2009/01/01/how-to-unlock-your-3g-iphone/
Note that if you have an iPhone 3G under contract, unlocking it will void your warranty and the contract.
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