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I've been wondering about this for awhile. So, is it possible to create a Wi-fi hotspot from an iPhone or 3G iPad?

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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.

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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.

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