This is a step-by-step guide to activate and unlock your iPhone without AT&T service. It will let you use Safari and other iPhone apps (except YouTube) over WiFi.
On July 3rd, DVD Jon published techniques to unlock the iPhone and activate it without AT&T service. It is not SIM unlock so it won't let you use your iPhone on other GSM networks (e.g. T-mobile). On July 10th, PQ DVD streamlined the techniques into a single, one-click Windows app.
Step 1: Install iTunes 7.3.0.54. No other versions of iTunes are currently supported. Apple released v7.3.1.3 on July 11th, so you'll need to find an archived version. At the time of writing, you can find v7.3.0.54 here.
Optional step: Connect your iPhone over USB and verify that it's detected by iTunes, then quit iTunes.
Step 2: Run iPhone Unlock Toolkit, and click the "Unlock iPhone" button. It streamlines the process of patching iTunes, adding an entry for albert.apple.com to your etc/hosts file, and running a local server to respond to the activation request.
Step 3: Disconnect and re-connect your iPhone. iTunes will detect the iPhone, start automatically, and ask you to activate your iPhone. Click "Cancel" and you're done!
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