how does one go about doing this. I'm familiar with jailbreaking. That wont be the problem. I've seen a couple ideas out there (MyWi and TetherMe being the general solutions), but i can't seem to find any solutions that are really, truly free.
For 3g, you will not get the Hotspot feature as the latest IOS is 4.2.1 even if you did like on a 3gs or iphone 4, you have to pay for hotspot tethering. So MyWi or Tetherme are your best options for tethering.
I enjoy TetherMe, it's cheap and works well. But like another user said, be careful if you are with AT&T. If tethering is spotted you will get notified and be warned, continue to do it and you will be forced an additional $20 for tethering on your plan.