Hello friends,

I have brand new out of box iphone 3gs which comes with version 3.1 (7c144) and modem firmware 05.11.07

Is it possible to jailbreak and unlock this.? If so kindly advise how?

Thanks

yes you can do it.
check here
Dev-Team Blog

thanks for the info..

i'm confused which tool to use?

Can someone help me please?

Generally, yes but if it is really brand new you may have what is called a tethered jailbreak. If the 4th and 5th digit of your serial number are higher than 40 you have only the option of a tethered jailbreak. If it is lower than 40 you can use pwnagetool 3.1.4 or blackra1n to jailbreak and blacksn0w to unlock.

If it is higher than 40, you must use blackra1n to jailbreak each boot and use blacksn0w to unlock.

See this thread. Latest iBoot iBoot-359.3.2 with RC2 - Hackint0sh

and also the technical explanation by Tethered jailbreaks [iPhone Dev Team]

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