How to Unlock the iPhone 3G

Using WinPWN or PWNAGE on Windows / Mac

Your 3G iPhone can be unlocked and jailbroken on both Windows and Mac.

Prequisites
Preparing the Firmware
Pwning your iPhone
Appendix

Prequisites

If you're running windows, you should download WinPWN; if you're on a Mac, please download PWNAGE Tool 2.0. You'll also need an iPhone, and the latest version of iTunes! Here are the firmware links:

iPhone V1 (2G): iPhone 2.0 (5A347) firmware for 2G (10121)
iPhone V2 (3G): iPhone 2.0 (5A347) firmware for 3G (3883)
iPhone Bootloaders for 3.9 and 4.6 firmware

Preparing the Firmware

The first thing you need to do is prepare a "pwned" version of the official Apple 2.0 firmware. This is easy enough to do, just run WinPWN or PWNAGE. On the Mac, you'll need to select your device first. Now, click "browse IPSW" and select the firmware you just downloaded:

Click on "Build IPSW" and choose the "Install Cydia." This will build you a restore image you can then use in iTunes.

Pwning your iPhone

Launch WinPWN or PWNAGE again, and pick the brand new IPSW you just built. Click on the "iPwner" button to prep iTunes. Put your iPhone in DFU restore mode by following these steps. This will let you restore it in iTunes:

Turn off your iPhone.
Hold down the power and home button.
When you see the Apple logo, release the power button but continue holding the home button down.
Open iTunes and wait for it to tell you that its in restore mode.

Now you just need to shift-click (or option click) the restore button in iTunes and select the firmware you build previously, and do the restore process as usual. Congrats, you're done!