iPhone: The hacking race begins

In the past, there was a great market for cracking the service linkages of phones. The concept being, SIM based GSM phones in many countries are locked to service providers. They are much cheaper than their cost because of the service conrtract, with a subsidy being provided by the telecom carrier such as AT&T, SPrint, etc. This subsidy is provided because the contract normally locks the user in for a 2 year conract, and the company can recover the subsidy during this period.
The iPhone is a somewhat different model. AT&T does not provide any subsidy for the iPhone, with the full cost of the phone being the amount charged ($499 for a 4 GB one, and $599 for a 8 GB one); but Apple, presumably in a bid to repay AT&T over the allowances allowed to Apple while designing the phone prevents another SIM from being used in the phone. In addition, no functionality of the device such as music playing, video, camera, etc can be used without activation (which can only happen with AT&T in the US - and not yet allowed outside the US).
Thus the cat and mouse game between a company and hackers has now begun. The iPhone is a prime target for hackers and crackers, many seeing it as a game / test; and many seeing it as something worth a great deal of money. When Apple would have designed the phone, it would have been a priority to set the security of the phone such that the protection would have difficult to crack:

Locked phones can only be used with cellular service from one carrier, a move designed to guarantee carriers recover the cost of subsidizing a handset through monthly service charges. But the cost of the iPhone, which is priced at either US$499 or $599 depending on the model, is not subsidized by AT&T. Users must pay full price for the handset and sign a two-year contract, which requires them to pay from $59.99 to $99.99 per month for cellular service.
Unlocking the iPhone will enable the handset to be used with any cellular provider with a GSM (Global System for Mobile Communication) or EDGE (Enhanced Data Rates for GSM Evolution) network, not just AT&T's network. That's an attractive proposition for users who already have a cellular contract with another carrier, or users outside the U.S. who can't wait to get their hands on Apple's new handset.
Efforts to unlock the iPhone are being tracked on several Web sites, including Hackint0sh and the iPhone Dev Wiki.

This is also something that is a bit odd. If users are being made to pay the full amount for the phone, then they should be able to use the phone at their discretion. It is understandable if the iPhone was subsidized, in which case the service provider locks the phone until the subsidy has been paid. But to lock the phone till activation and prevent usage of other functions is very strange, and once could argue, an extra charge that a user has to bear for having the iPhone. Especially because the AT&T network has been shown to be a slow one, and limiting the speed of wireless browsing.
It is bound to happen sooner or later that the unlocking scheme will fail, and when that happens, it will be a pretty simple job to do this in mass. That will be time when the world proliferation of the iPhone begins.