This video tutorial shows you how to jailbreak and unlock your iPhone 2G, iPhone 3G, and iPhone 3GS on firmware version 3.0.1 with Redsn0w and Ultrasn0w.
Firmware 3.0.1 fixes the SMS hack/vulneravility

Download Redsn0w v0.8: http://thebigboss.org/hostedfiles/redsn0w-win_0.8.zip

Download 3.0 firmware for your iPhone: http://www.felixbruns.de/iPod/firmware/

Yes download 3.0, NOT 3.0.1
(Note: If the firmware is zipped and in a ".rar" file format just change the .rar to ".ipsw"

Download bootloaders for unlocking iPhone 2G: http://www.mediafire.com/?9mdezqi2jem

Add this source to Cydia to unlock your iPhone 3G or 3GS and install Ultrasn0w: repo666.ultrasn0w.com

Written instructions: http://www.iphoneinquirer.com/2009/07/how-to-unlock-and-j...

You can also visit my website to get all these download links and more: http://www.iphoneinquirer.com/2009/07/downloads.html (less info)