I've been wondering about this for awhile. So, is it possible to create a Wi-fi hotspot from an iPhone or 3G iPad?
Yes, it's called "Personal Hotspot" by Apple and works on iPhone 4 and 4S. Here is an Apple support doc on it. Not available on the 3G iPad though, as far as I know.
The short answer is yes. Longer answer, there are two ways of doing it:
- Legal (using contract from your mobile provider)
- Jailbreaking (using Cydia)
This Gadget Review article covers both methods, using both the built-in iOS Personal Hotspot option and the Cydia MyWi app. Other articles include this MacWorld article and the AT&T Wi-Fi main page. Wired has a Verizion-specific article as well.
For the iPad 2, it looks like it's possible with the MyWi app, according to this page. Have never tried it myself though.