How to unlock iPhone 3G

What you will need:
- iOS 4.2 http://appldnld.apple.com/iPhone4/061-9853.20101122.Vfgt5/iPhone1,2_4.2.1_8C148_Restore.ipsw
- redsn0w 0.9.6b6 (windows) http://dl.dropbox.com/u/1471698/blog/redsn0w_win_0.9.6b6.zip

WARNING — YOU DO THIS AT YOUR OWN RISK!  PLEASE UNDERSTAND THE CONSEQUENCES OF UPDATING TO 06.15.

1. There is no way to come back down from 06.15, and there’s no hiding the baseband version from Apple. You’ll be voiding your warranty in a very obvious way.
2. If some future baseband comes out with a critical fix, you won’t be able to update to it if it remains down in the 05.xx sequence (then again, you wouldn’t update to it if you wanted to keep your unlock anyway).
3. Starting with FW 4.2.1 if you have 06.15 on your iPhone you won’t ever be able to restore to stock firmware (it will fail).  You’ll need to only restore to custom IPSWs (then again, if you’re unlocker you should already be doing that).

Certainly don’t update to 06.15 if you don’t need to!  Only do this if you need the unlock and you’re stuck on 05.14 or 05.15, and you’re willing to assume the above risks.

Step 1. Next Launch Redsn0w and Browse to the iOS 4.2.1 or 4.1 and Click Next to proceed. (Windows 7 and Vista users, please run redsn0w as Administrator in “XP Compatiblity Mode”)

Step 2. On The next screen Select ‘ Install Cydia‘ & ‘ Install iPad baseband‘ this will fetch the iPad 3.2.2 baseband 06.15.00 and overwrite it on youriPhone.

Step 3. Next you would be prompted to make sure that your Device is both Turned OFF and connected to computer.

Step 4. Next you would require to Put your iPhone in DFU Mode. Follow Onscreen instructions. Hold down both Power and Home Simultaneously for 10 Secs. And then Release Power Button However keep holding the Home button until the Installation begins.

Step 5. After a while the Jailbreak process will be completed on your iPhone it will reboot and you will have it updated to exploitable baseband 06.15.00. Now simply Install Ultrasn0w from the Cydia and Unlock your iPhone.

Step 6. Insert your T-Mobile, Maxis, DiGi, Celcom, or any other sim-card into the phone and it will magically work.  Congratulations you have successfully unlocked your iPhone 3G.

Instruction Source: http://ijafri.com/2010/11/29/guide-to-update-iphone-3gs-3g-to-baseband-06-15-00-with-redsnow-redsn0w-0-9-6b5/