Total Estimated Time From Start To Finish: 15 > 35 Minutes depending on your experience level.

Please note: This does require Jailbreaking your iPhone but following my steps we have had zero bricked iPhones reported however continue at your own risk.

Step 1: (Download the required Mac OS X Software)

(if your iPhone is already Jailbroken simply save Proxifier.pkg and continue at Step 3)

1. iPhone1,2_2.1_5F136_Restore.ipsw (iPhone Firmware Restore Firmware, In case of jailbreak issues)
2. iPhone1,2_2.1_5F136_Jailbroken_AT&T.ipsw (iPhone Custom Jailbroken Firmware for AT&T service)
3. iPhone1,2_2.1_5F136_Jailbroken_Unlocked.ipsw (iPhone Custom Jailbroken Firmware for other service)
4. iPhoneModem.dmg (Mac OS X software for connecting to the iPhones 3G Network)
5. Proxifier.pkg (Mac OS X software for making all network activity use your new iPhone modem proxy)
   

Jailbreak_And_iPhoneModem.zip (Right click this file and Save As.. to download all of the required files in one compressed file then extract them onto the Desktop)

Step 2: (Jailbreak your iPhone)

1. Simply plug your iPhone up to the computer that you usually sync it with then hit play on the video below and do exactly as it shows the very second you hit play.
3. If you follow the instructions above and your iPhone screen is black then your iPhone IS successfully in DFU mode and iTunes should launch and tell you just that, Otherwise reboot your iPhone and follow the video above exactly as it shows until iTunes tells you that you are in DFU Mode.
4. Once your iPhone is in DFU mode simply pull up iTunes and select your iPhone in iTunes then hold the ALT/Option key on your keyboard down and while holding the key down Left Click the Restore Button, Now a file browser window will pop up, Simply browse to the Jailbroken firmware file you require and select it then hit Open (For all AT&T service provider clients simple select the iPhone1,2_2.1_5F136_Jailbroken_AT&T.ipsw from the file you saved and extracted earlier, If your not an AT&T customer and you need to jailbreak and Unlock your iPhone for another service provider then select the iPhone1,2_2.1_5F136_Jailbroken_Unlocked.ipsw file)
5. iTunes will now backup your iPhones files and data then it will install/restore the new jailbroken firmware on your iPhone. This can take up to 10 minutes.
6. Once the firmware backup/install/restore is completed your iPhone will reboot and you will notice new custom applications present on your iPhones SpringBoard (the iPhones desktop)! The two main files are “Installer” and “Cydia” both of these new applications are much like iPhones standard “App Store” software only they include totally free software with many features that App Store software isn’t even allowed to offer (such as the Modem software and many many other excellent programs such as NES roms, Custom iPhone themes etc..)

Step 3: (Installing and configuring the required custom iPhone applications)

1. Launch the new Cydia program found on your iPhones Springboard (iPhone Desktop), Wait for everything to load then select the Search button now lets search for “iPhoneModem”, PLEASE NOTE: You may get two search results that say “iPhoneModem” be CERTAIN to only click on the one that says “iPhoneModem zsrelay” now click Install at the top right then select Confirm, If there are any red update icons on the bottom of the Cydia interface before to follow the instructions and update them all, It is an intuitive automated update process and very easy to follow.
2. Once this is done reboot your iPhone (Hold down the top Power button and the round Home button simotaniously until the iPhone shuts down and then powers back up again, Once it shuts down and you see an image appear (most likely a pineaple) you may release both buttons, Now wait for the iPhone to finish booting up.
3. Now Click Settings then scroll down and click on iPhoneModem make sure that you enable all of the features, Enable Proxy (On), Insomnia Mode (On), SSH on Launch (On), Note: You should always disable all of these features when your not using the iPhoneModem and your not hooked up to USB power as they do drain the battery significantly.
4. Go back to the Settings screen then select General then Select About now scroll down to the “Wi-Fi Address” and write down the data next to it, It should look something like “00:21:D9:4R:98:18″ you will need this for the Mac OS X Software configuration in the next and final step of the setup.

Step 4: (Installing and configuring the required Mac OS X Software)

1. Locate  Proxifier.pkg file that we downloaded earlier (You either downloaded it by itself or you’ll find it located in Jailbreak_And_iPhoneModem.zip) now lets launch Proxifier.pkg and install the Proxifier program, We should also create an alias for this file and place it on the desktop as well, Now launch the Proxifier application and select Options from the menu bar then select Proxy Settings… now hit the Add button, In the “Address:” field enter “192.168.100.113″ and In the “Port:” field enter “1080″ now select “SOCKS Version 5″ radio button then hit the OK button then hit the OK button again, Now you may close Proxifier entirely out we are all done configuring it, (The Proxifier program will ALWAYS stay closed unless the Mac is connected to the iPhone and using it as a Modem!)

Step 5: (Connecting Mac OS X to the iPhone as a Modem for the first time and finalizing the configuration)

1. (Note: Before continuing to this step be sure that you did in fact enable all of the iPhoneModem settings on the iPhone such as Enable Proxy, Insomnia Mode and SSH on Launch earlier in Step 3, Part 3 as previously instructed)
2. Plug the iPhone into the USB and connect it to your Mac now if you have not already done so.
3. Now on your Mac for ease of setting up the iPhone 3G Modem and switching between Wi-Fi and 3G profiles we need to enable the “Show AirPort status in the menu bar” if it is already enabled and you can see your Wi-Fi selector in the top menu bar then select Open Network Preferences.. from the Wi-Fi menu and continue on to Step 4 otherwise simply open System Preferences then select Network then at the bottom left of that window simply enable the checkbox next to “Show AirPort status in menu bar”
4. Select the drop down box next to “Network Name:” and select Create Network… in the text field labeled “Name:” enter “iPhone WiFi” then select OK, Once its done adding the new network to the system and enabling it click the Advanced… button now select the button with the ”+” on it below Preferred Networks: list box and in the “Network Name:” field enter “iPhone WiFi” and select the Add button, Now select the OK button and finally select the Apply button you are now entirely done configuring your Mac!

Step 6: (Configuring the iPhone to allow your Mac to use it as a gateway, The Final Step!)

1. On the iPhone Open Settings then open Wi-Fi now browse the available network list for the network you just created on your Mac which was named “iPhone WiFi” and select it, Now click the blue circular right arrow next to “iPhone WiFi” to view its advanced settings, Now select the Static tab and in the “IP Address” field enter “192.168.100.113″ and in the Subnet Mask field enter “255.255.0.0″ and in the DNS field enter “4.2.2.2″ now scroll down and you will see options for “HTTP Proxy” select the Manual tab and in the Server field enter “192.168.100.113″ and lastly in the Port field enter “1080″, Now go back to the Springboard (iPhone desktop) by clicking the “Wi-Fi Networks” tab at the top left then you may hit the home button and that’s it your all done!

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DETAILS REGARDING SWITCHING BETWEEN Wi-Fi AND iPHONE MODEM: Once you’ve completed all of these steps you will never have to enter any type of information to switch between your Wi-Fi networks and your iPhone 3G Wireless Modem connection! All you will do is simply choose any Wi-Fi network you wish to use and make sure that the Proxifier application on the Mac is not running then you can just surf like normal, Then anytime you wish to use your iPhone as a modem or you dont have another internet connection readily available simply select “iPhone WiFi” from your Mac’s available wireless network list and launch the Proxifier application on the Mac then make sure your Enable Proxy , Insomnia Mode and SSH on Launch are all enabled in the iPhoneModem configuration under your iPhones Settings panel then just plug your iPhone into your Mac with the USB cable then select the “iPhone WiFi” wireless network on the iPhone and your connected to the internet with your new iPhone modem!

QUICK HOW-TO SWITCH CONNECTIONS:

To use Wi-Fi or Lan on your Mac: Make sure Proxifier is NOT running on the Mac, Select the non iPhone network connection you wish to use and thats it!

To use iPhone Modem internet connection: Make sure Proxifier IS running on the Mac, Confirm that Enable Proxy ,Insomnia Mode and SSH on Launch are all enabled in the iPhoneModem under Settings, Select “iPhone WiFi” from the wireless network list on the Mac, Plug the iPhone into the Mac then select “iPhone WiFi” as the Wi-Fi network on the iPhone under Settings and your done!