There are two ways to go about fully unlocking an iPhone in order to use it with any carrier and network. A "software unlock" involves extracting the unlock key from the iPhone's radio chip and then using the unlock command and key to unlock the phone--this is how Apple or AT&T would unlock a phone. There's also a "hardware unlock," which uses a Turbo SIM or other methods to unlock the iPhone. Hackers have been working at unlock the iPhone using both methods, and the latter route has been successful, resulting in a supposed full hardware unlock of the iPhone.
Unlike the Turbo SIM method, extra hardware is only required for the initial unlock, after which it can be removed. Unfortunately, this latest unlock requires some "complicated soldering" in order to work, so it's not recommend for casual users (or for any users, really). The group responsible for the unlock has yet to reveal how they did it, but a look at previous posts on their blog offer some hints. To me, it looks like the team was able to use the JTAG interface to get more information, leading to the ability to upload and boot from a new BootROM, but I could be quite wrong.
A hardware unlock like this should make finding a software unlock much easier. Rather than release instructions now, the hardware unlockers say that they are going to release step-by-step instructions in a week. By that time, they hope to have found a hardware-less method of unlocking the iPhone, or at least a substantially easier hardware unlock. It's an impressive achievement, and I suspect we'll see a full software unlock very soon. And if you were waiting to be able to use your iPhone on another network, you may want to get your credit cards ready. I can feel Jacqui's spider-sense tingling already...
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