UPDATE : The following guide holds good only for iPhone 3GS 3.0 firmware. For 3.0.1 use redsn0w guide instead!
Geohot has done it again! He gave us the first jailbreak for iPhone 3GS and now, we have a much more efficient iPhone 3GS unlock – purplesn0w. Seriously, all the sn0w versions are confusing but well, that is their game!
For now, the iPhone 3GS should be activated using an official carrier before purplesn0w is installed on your iPhone 3GS. (Hacktivation for other carriers to follow soon)
Why is this unlock (purplesn0w) more reliable …

UPDATE : iPhone 3GS has a different security feature which disables it from using any other firmware rather than the latest available. So, if you still need Unlock and Jailbreak, custom firmware (look in categories) is the only option we have. The following article is not recommended anymore. Thank you.
Geohot rules yet again! He was the one to have unlocked the iPhone first generation phone back in 2007 and now, he is back with more! This time it is iPhone 3GS that is unlocked and jailbroken by the hacking maestro …