Smart guys have managed to partially unlock the iPhone, enabling them to make calls without an AT&T contract.
It's claimed that the hack allows you to use an iPhone with any existing Cingular/AT&T pre-paid/MVNA SIM so it's not required anymore to get a 2-year AT&T contract.
Apparently, the amazing code wizards at the iPhone Dev Wiki have been able to partially unlock the iPhone using a new application called iASign. It won't fully unlock the iPhone for use with other companies, but the hack will allow you to use any existing Cingular/AT&T Pre-paid/MVNA SIM so you don't have to get a two-year contract with AT&T. We are now testing this, but if confirmed the benefits are great.