From ModMyiFone - Wiki
Using SFTP is by far the easiest way to mod your iPhone yet. (08.19.07). In order to do this, you have to have installed SSH on your iPhone. The newer (post February 08) methods of jailbreak/unlock generally include this, so you probably already have it.
I will be using FuGu for this tutorial, since it is free. CyberDuck also works. I prefer Coda or Transmit, but they both cost.
Step 1.
Download and install
Fugu.
Step 2.
Check your iPhone's IP address. This can be found by going to Settings>Wi-Fi on your iPhone itself, and clicking the blue arrow next to the network you're connected to. The IP Address will be displayed on the page that comes up. Note that for the next step.
Step 3.
Open Fugu. In the connect area, put in the IP address you just wrote down for your iPhone. Use the login
root, and port 22. Hit Return.
Step 4.
Enter the password as Fugu asks for it. Unless you changed it (which only you would know), it's "dottie" for 1.0.2 and under or
alpine for 1.1.1 and over.
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Step 5.
Now you're in your iPhone! Most of our modding is done from the root directory of the iPhone and downwards, so select the drop down menu and click the
/ option at the bottom so you're seeing your iPhone's root directory.
Step 6.
Congratulations! Now you're in your iPhone, and can drag and drop files between your computer and your iPhone. This makes for MUCH easier modding. Enjoy...