if you are in US then get the Gevey Turbo Sim for your 2.2.1 iPhone. rest its all here and even you can get the tools online..
if you already have the iPhone its ok. or if you are planning to buy a new one, then get the factory unlocked iPhones, which used to be $800 is just only $499 now (recession everywhere)... so that will take off your headache of using it with any network legally!!!!!!. ...
with the factory unlocked version you dont need to worry about firware upgrade either, you can ger the version 3 launched for beta testing......

anyways dont confuse this with jailbreaking.. jailbreaking becomes necessary if you want to either unlock your AT&T locked iPhones or to install 3rd party iPhone applications and games (which you get if for free).

with your factory unlocked iphones you can shop with apple store alone unless jailbroken.....

you can find the Gevey turbo sim (i recommend this as i have tried it on Qtel even on T-mobile and works charm) on ebay sometimes even for $10. look out for new version "Gevey plus 2". best wishes.

Shyams