The hacker group known as iPhone Dev-Team apparently is close to unlocking iPhone 4 in order to run unofficial apps and to use other GSM cellular networks besides AT&T.
Unlocking the operating system, usually termed jailbreaking, lets the user further customize the phone and load and run applications apart from Apple's iTunes/App Store Web site. Unlocking the cellular baseband, sometimes called either a carrier unlock or a SIM (Subscriber Identity Module) unlock, means the phone can accept a different SIM card to work on other GSM networks.

Wikipedia has an exhaustive account of iPhone/iOS jailbreaking attempts and tools.

Some bloggers, such as Mic Wright at ElectricPic.com, are already making their wish lists of jailbroken applications, which need a custom installer such as Cydia. Wright listed five:

* Allowing Apple's FaceTime video chat to work on 3G cellular connections.* Support for 720p high definition video uploads, not just downloads.* Installing custom wallpapers and themes, changing iPhone icons, and so on, similar to the capabilities in Winterboard (iPhoneHeat.com has a Winterboard tutorial).* And an application to turn the iPhone 4 Wi-Fi adapter into a local hotspot, letting other devices attach to the iPhone and share its 3G connection to the Internet.* Wireless gaming controller to work with the Wii, Xbox 360 or PS3, exploiting the iPhone 4's new gyroscope.

The link for this article located at IT World is no longer available.