From ModMyiFone - Wiki
This is a quick and easy guide for getting started with modding your iPhone. It is comaptible with OS X (PPC and Intel) and Windows.
NOTE: The web is full of obsoleted methods for iPhone modding. These instructions replace and supercede any guides that mention Jailbreaking, iBrickr, Breezy, iFuntastic or anything else of the like. If you have started to install any of these, go ahead and restore now, so you can start properly, with a fresh start.
That said, let's get started:
1) Plug the iPhone into your computer.
2) No…use the cable, genius.
3) Make sure iTunes/iTunes Helper are NOT running. For Mac users, you can do this by going here: Applications/Utilities/Activity Monitor, Select iTunes Helper and Quit process (Windows users: open the Task Manager and look for these in the “Processes” tab. If you see them, highlight and click “End Process” – Click OK at warning)
4) Go to http://iphone.nullriver.com/beta/ and download the appropriate version of AppTapp Installer.
5) Unzip and run the program.
6) Restart your phone. You should now see “Installer” underneath the regular icons on your home screen. Launch it.
7) Now, you have a lot of Apps to choose from. But you need more. So, the first thing you’ll install is “Community Sources”
8) Close Installer…Your screen will freeze for a moment then go to the unlock screen. Unlock it and launch Installer again.
9) Now there will be more Apps to choose from. We’re going to install some. Install, in this order, the following (close installer after each):
a. BSD Subsystem
b. OpenSSH
c. SummerBoard (You’ll need to restart the iPhone after installing)
d. You can install whatever else you like, but you’ll need those 3
10) Open your preferred FTP client (If you need one, there are free ones available on the web. Cyberduck (OS X) and Winscp (Win) are recommended. I’d post links, but you should be capable of using Google by this point.
11) On your iPhone, go to Settings > WiFi and tap the blue arrow next to the WiFi network you are currently connected to. Write down the first IP address. This will usually start with 192, and is in the format of xxx.xxx.x.xxx. If you are using a apple router it starts with a 10.
Go back to your FTP client and enter your settings as follows:
a. Server: your phone’s IP
b. User Name: root
c. Password: dottie
d. Port: 22
e. Protocol: SFTP
f. Remote Path: /
12) Now you can connect to your phone over your WiFi and Drag-n-Drop files from your computer. Make sure your phone doesn't go to sleep. You want to keep it so you can see your homescreen Icons, or else the computer may not be able to connect to it. Also, if you restart your phone, you may need to update the IP address in your FTP client. (remember that your phone and your computer have to be on the same network)
13) You are done! For info on where to SFTP files for modding, please see this guide:
http://modmyiphone.com/wiki/index.php/Main_Page#iPhone_Reference