GeoHot has released a free unlock for the iPhone 3G and iPhone 3GS called blacksn0w. You can install blacksn0w from the blackra1n application installed on your iPhone when jailbreaking with blackra1n. You can also install blacksn0w from Cydia by adding blackra1n.com to the Cydia source list.

blacksn0w is a free unlock for the latest iPhone 3G and 3GS

blacksn0w is also available on Cydia, add blackra1n.com as repo
requires firmware >= 3.1 and baseband 05.11.07

If you happen to use blacksn0w and run into Wi-Fi issues, GeoHot suggests you try to Reset Network Settings in Settings -> General -> Reset -> Reset Network Settings.

- source: iphonejtag.blogspot.com