Jailbreak is not Activate is not Unlock.
If you get lost in the vocabulary, you might want to read Baseband is not Bootloader is not Firmware (http://www.hackint0sh.org/forum/showthread.php?t=32604)
Getting to Installer
What is it?
The Jailbreak is the first step in hacking the iPhone. When the iPhone is in it's Factory Fresh state it's filesystem is very well protected. It helps to think of the iPhone as a car. Apple wants you sitting in the back of the car, with the child-locks on the door. This back seat part of the iPhone is where the music, the videos, the wallpapers and photos go. You read and write to the back seat of the iPhone all the time. Apple is happy for you to do it. They're happy to let you get in the back, ride around on AT&T roads, and let you out whenever you like. But they're not going to let you drive.
We want to drive.
Our iPhone car is like a police cruiser. There's a big, heavy, metal gate between the back seat and the front. So how do we get into the front seat?
This is where the jailbreak comes in. The jailbreak is a process to get out of the backseat and open all the locks on the car, so you can get up there with the steering wheel, the pedals, the radio and siren controls, and that shotgun. Ohhhh... we want that shotgun, baby. (Well, what we really want is the ability to "pop the hood." But we'll get to that...)
Why do I care?
You can't do anything interesting from the backseat of the car. This is the area known as a chroot jail (hat tip to thecompkid for http://www.hackint0sh.org/forum/showthread.php?t=14352)
. It is a folder which you're not supposed to get out of. You can add files and folders to it, but you can't see the file-cabinet it's locked in.
Once you jailbreak the phone, you have access to everything the cops have access to. You can read through their computer files, run the siren, mess with the guns... Once you jailbreak the phone, you can start running any programs you want on it. You are in charge of everything IN the car.
How can I tell?
The universal symbol of a jailbroken phone is the Installer Application. Back on 1.0.2, adding installer was a seperate step from Jailbreaking and had to be done through a manual ssh session or, later, the apptapp installer. After the 1.1.1 method from jailbreakme.com, jailbreak methods have included the Installer application as part of, and proof of, their Jailbreak.
Getting Past "Slide for Emergency"
What is it?
Apple made life for the dev team exceptionally difficult with one simple phrase. "Slide to Unlock." Because of that specific wording, hackint0sh.org and other sites have been deluged by people thinking they "unlocked" their phones as soon as they got past the "Slide for Emergency" screen. Because the "Emergency" slide and the "unlock" slide are virtually identical, it just made people interchange the words.
Activation, in our Police Car metaphor, is like getting arrested. Apple wants you to let AT&T arrest you, and put you in the back seat of the car, where you belong. And, if you are an AT&T customer, you can achieve this step without ever performing a jailbreak. However, if you're ultimate goal is to run your iPhone on Tmobile or Rogers, you can't even get Arrested in iPhone land. So, how do you get into that wonderful front seat full of goodies?
Well, luckily, once you have access to the System files on the iPhone, you have access to the whole thing. And it's pretty easy to fake an iPhone Activation. (Sometimes you'll see a message about activating youTube on the phones. For clarity's sake, I think this should be referred to as YouTube Licensing... but I'm not the boss of anybody. YouTube activation is generally handled by most current Jailbreak solutions, and is automatic.)
Why do I care?
Well, if you're an AT&T customer looking to add apps to your phone, you can avoid a lot of unecessary steps in most iPhone tutorials. As an AT&T customer you are already activated (arrested). All you need to do is jailbreak the phone. That's it. And believe me, you want to run as little code on the iPhone as you can get away with. Every hack and jailbreak is a risk, no matter what anyone else tells you. In the end, whatever you download, run, or try is between you and the $400+ you spent on that phone.
Also worth noting, as you can probably tell by now, is that iPod Touch users do not need to Activate. Ever.
Activation (sometimes called "hacktivation" to help differentiate true AT&T customers from unlockers) is only needed by people who do not have an AT&T iPhone Contract.
IF you are an AT&T (or other sanctioned service) customer, you can activate before you jailbreak.
If you are not goin to sign up for an iPhone sanctioned cell account, you must jailbreak to perform a fake activation (or hacktivation) of the phone.
How Can I Tell?
Out of the Box, or after an update, your phone will have a screen that says "Slide for Emergency." Connect your iPhone to iTunes and do a sync, then disconnect. If you couldn't do a sync and the screen still says "Slide for Emergency," you need to activate it. If, after syncing to iTunes, it says "slide to unlock," congrats. You are one Activated son-of-a-gun.
What is it?
Unlocking the iPhone means the same thing as unlocking the SIM of any other cell phone. On most cell phones, this is done by typing a special code into the phone and pressing send. The code signals the phone to enter an "unlocked" state-- meaning it will now accept any sim card from any carrier. The Baseband of the cell phone is told to stop verifying the Sim Card's company affiliation.
To the best of any non-Apple-employee's knowledge, those codes do not exist for the iPhone.
You could assume that somewhere in the baseband is a line of code which says "Should I Verify AT&T Sim Card? Yes/No." You can also assume that the millions of hackers around the world have searched for that string and come up with nada. What they find is "I'm Going to Check for an AT&T Sim Card whether you like it or not." The unlocking process consists of deleting this line of code, or altering it so it just says "Yep, that there's an AT&T Sim Card all right" no matter what card is in the phone.
Why do I care?
There used to be a joke that ran: "If Microsoft Built Cars, you'd have to buy a new engine everytime they re-paved the road."
That joke was actually about the Apple iPhone. The iPhone only runs on AT&T roads. To make it run on any road we like, you have to change out the engine.
Unlocking the Sim is Re-writing the Baseband-- the cell-phone engine of the phone. The baseband is hardware. This is why Apple does not want to warranty hacked phones. You're going beyond adding an application here. You are rewriting the rules under which the hardware runs.
It sounds like a lot of work (and it is). It's also risky. If you mess up, you wind up with an iPhone that can't do any more than an iPod Touch. This does not mean the phone is "Bricked!" Bricked means the phone does not turn on, does not start up, does not show anything on the screen, does not pass go, does not collect $200. If your phone turns on, lights up, says connect to itunes-- does ANYTHING-- do not post a message saying you "bricked" your phone. Having no cell phone service does not a Brick make.
Now, if you're gonna put in a new engine, make sure you put in an engine that works! This is where knowing your Bootloader is essential.
Bootloader 3.9 is very easy going and gives you full access to the entire engine. You can take it out, put it in, make a bed out of the engine compartment... whatever you like. With Bootloader 3.9 we can unlock pretty much any baseband.
Bootloader 4.6 does not like doing this. Apple got so tired of the unlockers using this trick they welded the hood shut. 4.6 will let you write to the bootloader only if you know the special password. When a new firmware update comes out, it contains this password. (If it didn't, 4.6 wouldn't let it overwrite the baseband.) This means when I get Firmware 1.1.3, I finally know the password for 1.1.2's baseband. I won't know 1.1.3's password until 1.1.4 comes out, etc.
Because of this security system, one unlocking method developed which writes an unlocked baseband of the previous Firmware release. So, I install Firmware 1.1.3, but then install an unlocked baseband from a 1.1.2 phone. This version allows 4.6 users to gain Operating System features, even if baseband features like Locate are unavailable. (Better than nothing, right?)
ZiPhone is able to unlock the most current baseband, but only if you have Bootloader 3.9-- same with AnySIM 1.1.4 and iNdependence, I believe. If you have 4.6, you have to make a choice. Either downgrade your bootloader to 3.9, or downgrade your baseband to one we know the password for. If you downgrade the bootloader, there is (currently) no going back. No one knows what new firmwares or SDK apps are going to require the 4.6 bootloader, if any. Mainly, people advise against downgrading the bootloader simply because it is inreversible. We like to stick to doing things we can undo.
How can I tell?
Your phone is unlocked if you can take out the AT&T (or T-Mobile, or O2) sim that came with the phone, put in one from a different carrier, and make a phone call.
As before, if there's any info missing from this, let me know. If anything is inaccurate, let me know.