Note: off topic post coming up.

I've just come across a link that describes how to enable tethering on the iPhone 3G using the 3.0 software update that was released yesterday. Most of the guides I found seemed a bit complex and involved messing around in the Terminal - something that a lot of users find intimidating. But then I came across the following link (which you should access directly from your iPhone's web browser): http://help.benm.at/tethering.php
From the list that shows select your country (I chose UK), and your network provider (for most this would be O2). I installed the profile when prompted - do this at your own risk. Saying that, it's just a bunch of network profile settings so you can't really break anything much on your phone. But still, don't blame me, it's your phone.

Now that the network settings are updated you need to pair your phone with your computer via Bluetooth. To use the iPhone as a modem with a Mac, it must be running Mac OS X version 10.5.7 or later. I used my old Macbook Pro for this and the steps were as follows:

1) Enable bluetooth on the Macbook and the iPhone. On the iPhone this can be found under General > Bluetooth.
2) Pair the devices. After turning on Bluetooth on both my iPhone and Macbook I went into the Bluetooh preferences on the computer and chose Devices > Set up new device.
The Bluetooth Assistamt took me through the required steps and even though it showed an error for a few seconds it then found my iPhone. After being prompted for a code to pair the devices I was done.

3) Enable tethering on the phone. Go to Settings > General > Network > Internet Tethering and turn it on.

4) Back on the Macbook, make sure that the little Bluetooth icon shows in your menu bar (you can enable it in Bluetooth preferences if not), click it and select 'Join network on [name_of_your_iPhone]'

If everything goes to plan you can now open a web browser on your computer (make sure WIFI is off so you know that the tethering is what gives you net access) and browse the web. The iPhone will show a blue 'Internet Tethering' bar. Note that this setup works for me without having signed up or paid for a tethering add-on with O2 and I would expect this 'feature' to stop working at some point unless I pay for it. Which I won't. Because the proposed charges are a rip-off :) They may want to send me a bill - who knows, only time will tell.

Note: This guide is using O2 here in the UK, your mileage with other carriers may vary.