A few details from the iPhone Dev Team blog:
We have been working hard on a few other things. The main one being the 3G unlock codenamed "yellowsn0w". This is now completed and is currently being packaged into a user-friendly application with the simplicity that you see in QuickPwn or BootNeuter.
- The target release date for the unlock is New Year's Eve 2008.
- This unlock method is available to iPhone 3Gs that have 2.11.07 baseband or earlier, we did warn you.
- You can tell what version baseband you have by going to Settings->General->About->Modem Firmware
- The unlock requires a jailbroken 3G iPhone. It'll be installable via Cydia and so it doesn't matter if you have a Mac or PC.
- Please refrain from updating your baseband, regardless of what version you're at.
- We'll have complete directions on New Year's Eve.
- We'll stream a live demo of the unlock before Christmas (see the update at the end of this post)