The following is taken from :
The blacksn0w unlock has been released. blacksn0w is an unlock for the iPhone 3G and 3GS. It is available for both Windows and Mac. You can download blackra1n (which includes the blacksn0w unlock) at blackra1n.com or, you can add the blackra1n source in Cydia and get it via Cydia. The source url is http://blackra1n.com/.
“blacksn0w is the unlock for the latest 05.11.07 baseband, and will also enable official tethering. blackra1n, a jailbreak for 3.1.2, has been updated to RC3, with hacktivation support, 15 second speed improvement, Tiger+PPC support, and installation of the latest blackra1n.app.”
GeoHot – “to let everyone know, it is safe to restore to stock 3.1.2 using itunes, baseband update and all…thats the point of #blacksn0w”
If you are a loyal blackra1n user who kept the blackra1n.app on your iPhone, run it. You will see Icy replaced by an option “ra1n”. Install this to upgrade your app. After upgrading, run blackra1n.app again. You will see “sn0w”. Install this, and enjoy your unlocked iPhone.
If you are new to the scene, just looking for an unlock, finally ready to upgrade to 3.1.2 and the accompanying baseband, willing to restore for the latest and greatest, or stuck on the “Connect to iTunes” screen, you are in luck. Jailbreaking and unlocking have never been easier. Go to blackra1n.com, click on the logo corresponding to your operating system, run the app, and click “make it ra1n”. When your phone reboots, you’ll see blackra1n.app. Run this, install blacksn0w, and enjoy your unlocked iPhone.
Read more here on GeoHot’s blog.