EDIT: THIS NOW WORKS WITH ANY O2/AT&T/BASE PROVIDER SIM!! You can use any O2 sim with this method
Another Edit: I have EDGE settings for O2 contracts, scroll to bottom
Editing Again: I've added details to get the voicemail link working in "phone" application. However, this will not allow visual voicemail, just gives you a handy link to your voicemail 
Hi there. Because I'm lazy, most of this is copied from jailbreakme.com I'll leave credit where credit is due.
If you think this could be made simpler, which I'm sure it could be. Just drop a comment and I'll alter where it's needed. I'm online all day.
Note that an unlock has NOT BEEN DEVELOPED YET.
Do NOT USE anySim 1.2 as it we europeans have a new bootloader.
The bootloader is exploited in order to unlock the sim. Ours differs from the Americans' which has already been exploited. Just wait for a few days and I'm sure the dev team or someone will come out with one.
Things you'll need:
An iPhone
Working WiFi connection
-----> Jailbreak-1.1.2 by conceited software available from
here. Hats off to them.
-----> 1.1.1 restore firmware, available from
here
An FTP client capable of SFTP (details given later)
iTunes (any version > 7.3 should be fine)
About 15-20 minutes of your time
This section is copied from
www.jailbreakme.com/1.1.2
so it's quite reputable

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MAKE SURE YOU INSTALL SSH (Check the box in the jailbreak section) AS IT IS IMPORTANT FOR THE NEXT STEP.
Quote:
1.1.2 Jailbreak
**** NOTE: This method currently requires you be on 1.1.1 of the firmware. If you are on 1.1.2
you must downgrade prior to being able to use this jailbreak. ****
**** NOTE: PLEASE NOTE THIS METHOD ONLY WORKS ON ITUNES ACTIVATED PHONES OR IPOD TOUCHES ****
Step 1: Downgrade to 1.1.1 (if required)
*** NOTE: This guide does not guarantee it will work 100%. Also errors 1015 is expected at
the end of the process. Continue reading to understand. ***
1. Download the 1.1.1 ipsw firmware file from Apple. If the downloaded file has the extension
".zip", please remove it and modify it to end up with a filename ending in _Restore.ipsw
2. Reboot your iPhone holding the top (power) and home buttons BUT release the top button 10
seconds into it (right after the screen goes dark) and continue to hold the home button until
iTunes detects the phone in recovery mode. The iPhone screen will appear to be off, but start
iTunes if not started yet .
3. Restore your iPhone by pressing and holding the ‘Shift’ key on windows or ‘option’ key on Mac,
then click ‘restore’ to select the 1.1.1 firmware file you downloaded earlier. The restore should
go through and errors at the end with error 1015. However you will notice that the iphone is in
DFU mode with the connect to itunes screen from 1.1.1.
4. In order to kick the phone out of that mode I just had to launch iNdependence version 1.2.5
and wait a minute or so. If you are using iTunes 7.5 you will have to get a MobileDevice from a
previousv version in order to run Independence.
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If you are running windows. Simply download iBrickr from
www.ibrickr.com and run it, it will say something along the lines of "reboot iPhone". However, I wouldn't know, because it keeps crashing on me *grumble grumble*
If you are unlucky enough to be running vista, it almost definately will crash... alot. In fact, the only way to get it not to crash is to restart your computer and run iBrickr. Subsequent attempts before a restart will crash the program again.
If iBrickr still doesn't work, you'll have to get iPhuc from somewhere. I got it from iDemocracy by chance, so I'll lead you there. Also, I'll lead you there because in a few days, they'll have automated this process making this all completely redundant.
http://code.google.com/p/idemocracy/
just download idemocracy and there should be a program called "iphuc-jailbreak.exe" or something.
In iPhuc, type these commands:
cmd setenv auto-boot true
then
cmd saveenv
cmd fsboot
and it should reboot. Although, I recommend running iBrickr as each time you reboot, you'll need to keep typing in those commands.
Next:
Quote:
Step 2a: Jailbreak 1.1.1 on Unactivated iPhone
*** NOTE: If your phone has been activated through iTunes, you can proceed to step 2b. ***
1. enter *#307# press call, now use the back button on the top of your screen to remove *#307# ,
now enter 0 , press call, press answer, press hold, press decline. And you get to the contact
list. And thereafter every time you push the homebutton you just slide the "emergency call"
slide, then enter 0 , press call, press hold, press decline.
2. Push contacts, end call and you get called again, this time hit decline and you access one of
menus with favorites, you can edit contacts, do a test ride on keyboard, take photos etc.
3. Now edit a new contact and type in "prefs://11" as web-address and "http://jailbreakme.com" as
an additional URL.
4. When you tap "prefs://11" you can now select your favorite WiFi gateway.
5. Now press the home button and move the slider to the dial-pad.
6. Now you can go back to the contact list by Dialing 0, push call, then answer, then contacts,
then hit the "http://jailbreakme.com" web address you typed in.
7. Scroll down to the bottom, click "Install AppSnapp". Safari will exit and you'll return to your
springboard. Wait for the phone to reboot. You are now jailbroken. and are able to use
Installer.app.
----------------------------------------------------------------------------------------------------
Step 2b: Jailbreaking on iPod Touch or iTunes Activated iPhone
1. Launch Safari
2. Visit http://jailbreakme.com, Scroll down to the bottom, click "Install AppSnapp". Safari will
exit and you'll return to your springboard. Slide to unlock, you are now jailbroken. and are
able to use Installer.app.
----------------------------------------------------------------------------------------------------
Step 3: Prepare your 1.1.1 device for the Update
1. Launch Installer.app
2. Scroll down to Tweaks (1.1.1)
3. Select OktoPrep
4. Click Install
----------------------------------------------------------------------------------------------------
Step 4: Update to 1.1.2
1. Connect your device to your computer
2. Launch iTunes
3. Choose your device
4. Click Update
5. Wait forever for your device to update
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For step 4, when updating. If you get an annoying message saying that 1.1.1 is the latest version, download the 1.1.2 firmware from
here
Then press the shift key and click "check for updates" or "upgrade/update" depending on what you have (I think it's the option key and click on Macs).
A box should pop up, navigate to where you downloaded the 1.1.2 restore file, making sure it ends with _Restore.ipsw. Then open it.
(has the ipsw file extension)
Quote:
Step 5: Jailbreak your iPod Touch or iTunes activated iPhone
1. Close iTunes
2. Connect your device to your computer
3. On Windows, double click on windows.bat, on Mac, double click on osx
4. Follow the on screen instructions.
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This section may be a tad ambiguous. Firstly, unzip the jailbreak-1.1.2 zip file I told you to download eariler. Using Winzip or WinRAR or whatever you like.
Then there should be a file in there called windows.bat or run file called osx if you are on a Mac.
WARNING: If you are running osx, make sure you have libreadline which can be accessed
here. Just extract the whole directory to your hard drive and it should work then.
On Windows, you need Java, which can be googled very easily. (I havn't run it on mac, but I'm assuming you'll probably need the same).
Only use the next section if you have not activated your iPhone through iTunes.
Ok, at this point you should be at the activation screen you started off with riiight at the beginning. When you were young and all your favourite shows were on tv. With a vital difference, you now have a jailbroken phone and you can modify its filesystem.
To get around this you need something called a "modified lockdownd" file. This will bypass the activation screen. First, download this
here
(Shamelessly ripped from
hackint0sh)
Now we can use ANY O2 SIM with this special lockdownd file courtesy of Callx! THANK YOU!:
http://rapidshare.com/files/69520380...ownd_1_1_2.zip
(Taken from
http://modmyi.com/forums/unlocking-activation/15752-guide-jailbreak-activation-1-1-2-ipsf-only-3.html)
Now, if you enabled SSH like I told you to and can remember the password. Open up an FTP client that can handle SFTP. Two freeware ones I can recommend are:
Filezilla
and
WinSCP
just google them, they're pretty easy to find.
Now, go into the FTP client and type in the IP address of the iPhone, which should be in prefs: (back in the contacts menu) You can get to this using the methods outlined in step 2.
Go to wireless settings and touch the little blue arrow on the right which will display the IP settings.
Paste it into whatever FTP client you are using. In WinSCP you select the SFTP protocol and in Filezilla, make sure the port is 22.
If you used the defaults then the username is root and the password is alpine.
Once logged in, go to the base directory, (/). Then, go to user and the libexec.
I recommend backing up the lockdownd file (copy to hard drive and rename lockdownd-Backup or similar).
Then, copy the modded lockdownd provided to that directory, overwriting. Then, change permissions so that the file has permissions 755. In WinSCP you should be able to go to file properties and type in 0755 and in Filezilla it should be 755 in file attributes.
Then, reboot (hold sleep button for 5 seconds and slide to power down) and it should work!
EDGE settings:
If you are on an O2 contract (untested with PAYG) then use this for EDGE settings (Settings->General->Network->EDGE):
APN: mobile.o2.co.uk
username: faster
password: web
Voicemail hack:
Firstly, you need BSD subsystem. This can be installed using the installer application. It is in the "System" subfolder.
Allow this to install (could take some time).
Now, SSH into your iPhone, a recommended program to do this is PuTTY (google it).
Now, inside putty, you'll have to log in, if you installed SSH as instructed before, then your default password will be "alpine".
once logged in, just copy and paste these commands in:
rm /var/root/Library/Preferences/com.apple.carrier.plist
ln -s /System/Library/Frameworks/CoreTelephony.framework/Support/O2_UK.plist /var/root/Library/Preferences/com.apple.carrier.plist
rm -f /var/root/Library/Preferences/SystemConfiguration/preferences.plist
one after another.
Now reboot, and you should be able to click your way to voicemail

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(Adapted from the tutorial here:
http://code.google.com/p/iphone-elit.../o2ukJailbreak)