Hello, i need to restore my 3G with 3.1.2 custom firmware and need to know if should use activated option or not? I am not on an official carrier and need to unlock my phone to use on any carrier.

you need activation

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iPhone 3GS 32GB factory unlocked (3.1; Pwnagetool, Cydia, OpenSSH)
iPhone 8BG (3.1.2; Pwnagetool, Cydia, OpenSSH)

I've read about a lot issues that spring up after activation like youtube not working after activation. Can you enlighten me about that?

If you use pwnagetool to hactivate YouTube and gps/location services will work. Push mail will work. Push notifications will not work.

If you use blackra1n to hacktivate push mail will work the rest will not work. You can fix YouTube and Location Services by installing pushfix from cydia.

To fix push notifications, you need to ask a friend who can activate though iTunes nicely to generate you some legitimate certificates. The key then is to not share this unique certificate. Even your friend who gave you them should restore or kick off activation again to generate another unique certificate so they end up not still using the certificate they gave you.

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Please read the stickies and search the forum before posting!
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iPhone 3GS 32GB factory unlocked (3.1; Pwnagetool, Cydia, OpenSSH)
iPhone 8BG (3.1.2; Pwnagetool, Cydia, OpenSSH)

Can you tell me what push notfications are?

Under 3.0 applications can register with an apple server to send push notifications to your iPhone.

When you install an app that supports push notifications it will ask you if you want to allow the app to send push notifications to your iPhone.

The actual push notifications appear in a similar way to how SMS messages are displayed, in a dialog box on top of whatever app is running.

for more info see:
iPhone OS 3.0: About Apple Push Notification Service

Apple Push Notification Service - Wikipedia, the free encyclopedia

__________________
Please read the stickies and search the forum before posting!
----------
iPhone 3GS 32GB factory unlocked (3.1; Pwnagetool, Cydia, OpenSSH)
iPhone 8BG (3.1.2; Pwnagetool, Cydia, OpenSSH)

Thanks for the info bro...just one more question. If i restore iphone with custom firmware will it install cydia too. If not, how do i install cydia after restoring with custom firmware?

Yes custom firmware from pwnagetool installs cydia by default.

__________________
Please read the stickies and search the forum before posting!
----------
iPhone 3GS 32GB factory unlocked (3.1; Pwnagetool, Cydia, OpenSSH)
iPhone 8BG (3.1.2; Pwnagetool, Cydia, OpenSSH)

ok, thank you