You should search the forums first, but since this is your first 2 posts, I'll go ahead and answer.
You have to first "Jailbreak" the phone to open the OS to third party apps. I highly recommend AppTapp.
Then you have to install and run one of the several free unlocking software packages available to open the phone to use other carriers.
3rd and MOST IMPORTANT! You must NOT upgrade to iPhone Firmware 1.1.1
Your phone will become a "brick" and completely unusable.
If you are already on this firmware update, then I highly suggest that you wait till the Dev team finishes hacking the new firmware.
Personally, unlocking the phone to use other sims is a great thing, but you must take the following into consideration before moving forward.
1) you cannot update the firmware if you unlock the phone till someone has a simple working solution
2) if you unlock and start using the iPhone on another network, PLEASE make sure that you have an unlimited data plan in place or your first bill with the iPhone will be hundrend to thousands of dollars on whatever carrier you move to.
3)finally, do LOTS of research before doing anything.
Why the hell would you pay $0.10 per minute for prepay. If you can afford to buy an iPhone, you should be able to afford a normal service plan as well... it's like driving a Ferrari with $5 in your pocket for gas....
If you unlock your iPhone then you will NOT be able to update because the update from Apple will cause your iPhone to most likely become a brick, unless by that time the newest update has already been hacked and an unlock can be performed. But for every update after that you will have to wait for yet another hack.