There have been quite a few iPhone apps that have brought tethering to the jailbroken iPhone like iPhoneModem and PDANet.

But currently the most popular jailbreak iPhone app to enable tethering on the iPhone is MyWi developed by Intelliborn.

Here is a step by step guide to install and configure MyWi on your iPhone to turn it into a wireless hotspot so that you can surf the internet on your laptop using your iPhone's 3G or EDGE data connection. 

Note: MyWi works on iPhone OS 3.1 or later. It supports all iPhones i.e. iPhone 2G/iPhone 3G/iPhone 3GS. 

Few words of cautions before we proceed:

• Please note that jailbreaking your iPhone could void its warranty and so remember to proceed with caution. 
• Please be careful while using tethering as too much tethering data usage could get you into trouble with your carrier.
• This iPhone app also runs in the background even if you exit it so it could increase battery consumption.

If you would still like to proceed then here are the steps (courtesy folks at iClarified):

Step 1: If you already have a jailbroken iPhone, skip this step. Otherwise, click here for the tutorial on how to jailbreak your iPhone. 

Step 2: From the iPhone Springboard, launch Cydia -> Sections (at the bottom of the screen).

Step 3: You will need to install the MyWi iPhone app. To do this, tap on System -> MyWi (No Rock).

Step 4: MyWi costs $9.99 on the Cydia store. Tap on the 'Appsidy Buy' button on the top right side of the screen to purchase the app.

Step 5: Once the purchase is complete, install the iPhone app by tapping on Install -> Confirm that is displayed on the top right of the screen.

Step 6: Press the 'Restart SpringBoard' button to complete the installation.

Step 7: The MyWi app should now be available on your iPhone's home screen. Tap on the icon to launch the iPhone app.

Step 8: You will now be prompted to validate the purchase by pressing the 'Authenticate' button.

Step 9: Once this is done, get back to your iPhone home screen and relaunch the MyWi app.

Step 10: You will now be displayed the license agreement and carrier warnings. Tap on 'Accept Agreement' followed by 'Ok' to proceed.

Step 11: The WiFi hotspot now needs to be configured. Tap on the 'WiFi Name' field and enter a name for your wireless network.

Step 12: Pick a channel number on the 'WiFi Channel' field. If you are not sure, you may select any number between 1 to 10.

Step 13: It is always safe to secure your network with a password. To do this, first turn ON the 'WEP Security' option.

Step 14: Now enter a password on the 'WEP Key' field. Please note that the passwords must only contain numbers and letters between A-F.

Step 15: If you would like to tether your iPhone, enable the 'USB and Bluetooth' option.

Step 16: You are now almost done. At the top of the screen, turn the 'WiFi Tethering' option ON. The app will now display a 'MyWi Battery Notice' warning message. Tap OK to start the wireless network broadcast. 

This process will turn your iPhone into a wireless hotspot. All you need to do is connect your laptop to this Wi-Fi network to surf the internet. 

MyWi iPhone app has been around for quite sometime, so if you have been using it or give it a try using this guide then let us know how it goes.