OK, so this entry will probably hurt in the future (especially if AT&T actually reads my blog), but I'm going to put it out here anyway, because this is the one thing that makes my buying an iPhone 3G (there Apple, I even capitalized it right ... that counts for something, right?) an actual justification.
So, with other phones, I was able to tether fairly easily (see the WM6 write-up I did earlier). For people like me that don't want to carry around a 3G card for their laptop (or have a tmobile, AT&T, and who knows what other wifi hotspot account), tethering is about the only way to make sure and be able to jump online and get some work done while in between destinations. The 3G network, while not the zippiest thing out there, at least provides a respectable connection for email, some chatting (work based, of course), and some light web browsing. Heck, if YouTube can work on the phone in 3G mode, I should be able to use it on my laptop as well.
Earlier incarnations of tethering on the iPhone involved specifically using 3proxy (available from the Cydia installer). And, believe me, this worked quite nicely. Sure, there were some manual steps involved (e.g. setting up proxy settings for firefox and thunderbird), but in general it worked in a pinch. But, then along came PDANet to make things even better.
A port of the old PDANet application, this basically turns your iPhone into a WIFI router. Create an Ad-Hoc network, join your phone to it, and off you go. No longer do you need to change your proxy settings, just make sure that your default routes point to the IP Address of your phone. All network apps work without an issue (unless you count slowness an issue ... ok, so maybe one issue).
Now, I don't condone this approach. My feeling is that Apple completely missed the mark by creating an "open" development environment (App Store, how many flashlight programs do you really really need?) instead of an open one (see, no quotes). And by disabling some core features (e.g. tethering, bluetooth syncing, etc.) they've opened the door to people killing their market share (if only these "people" would get busy designing) as new phones come to market. And with each passing firmware update of nothing more than flash instead of substance (cut/copy/paste? really? still not there?) the lack of attention becomes more and more noticeable.