From ModMyiFone - Wiki
This guide will explain how to jailbreak/activate/unlock your 1.1.4 iPhone using iPlus 2.0b, by aviegas. The next version will include a GUI, this one is via command line, but extremely easy to use!
This guide is for OS X only. It works on PPC, Intel, Tiger, and Leopard.
First, lets get ready. Back up your iPhone in iTunes (just sync), and download iPlus2.0b (non-MMi-member mirror) to your desktop.
Good. Now, iPlus 2.0b ONLY works on 1.1.4, the latest firmware. The best idea is to run this on a fresh 1.1.4 iPhone, so lets go ahead and restore this to a fresh 1.1.4 iPhone. Again, make sure you have sync'd your iPhone in iTunes so you don't lose your settings, and sync up your images as well to iPhoto. If not, we'll lose them when we do the restore. That being said, here we go.
Make sure iTunes is open, and your iPhone is connected. Now, hold down the Home and Sleep button on the iPhone. As soon as the screen turns black, let go of the Sleep button (the top button), and keep holding the Home button. As soon as iTunes sees a phone in recovery mode (a pop up will come up in iTunes), let go of the Home button. The screen on your iPhone will still be black. If its not, try again. This puts the iPhone in DFU mode.
You will see the device in the left bar on iTunes.
Click that, and in the window that pops up, click Restore.
In the window that pops up, confirm by pressing Restore and Update.
You may or may not see the iPhone Software Update Important Information screen. If you do, click Next and Agree.
Again, if you have not previously downloaded the 1.1.4 iPhone firmware in iTunes, you will see it show up in Downloads.
When this completes, iTunes will pop up a bunch of status messages. No worries.
When it has completed, iTunes will let you know you've restored your iPhone to factory settings.
If you're not using an AT&T SIM, you'll see this message in iTunes.
All right, now lets get ready to run iPlus 2.0b. Make sure iTunes is quit. Open up Activity Monitor on your Mac. Its in Applications>Utilities>Activity Monitor.
Click iTunes Helper, and then click Quit Process.
A little window will pop up asking if you want to Quit Process, go ahead and click Force Quit.
Remember, iPlus should be downloaded to your Desktop. The folder will be named iPlus2.0. If it isn't rename it to that.
Now, open Terminal. Its on your Mac, under Applications>Utilities>Terminal.
Now, in Terminal, type
cd ~/Desktop/iPlus2.0
and hit Return. To make sure we've done this correctly, type
ls
and hit Return. You should see the following output:
Good. That means you've done it right so far. All right, here's the magic. Remember, iTunes should be quit right now, as well as iTunes Helper. Ok... to unlock, jailbreak, and activate your iPhone, type
./iplus -u
And hit Return.
NOTE: If you only want to jailbreak your iPhone (you have an AT&T account set up as an iPhone and you don't want to unlock your iPhone), type ./iplus -j instead.
Terminal will give you this output:
NOTE: If at this point you see an iTunes message pop-up, you have forgotten to quit iTunes Helper, hit Ctrl+C in Terminal, go back and quit iTunes Helper in Activity Monitor, and start from there again.
Terminal will now display the following:
Then...
and...
Once everything is complete, you will see the following message in Terminal:
Congratulations! Thats it! Your iPhone will restart, and you're all unlocked and jailbroken. Thanks, aviegas and iPlus. ;)