What It Does
"blacksn0w is the unlock for the latest 05.11.07 baseband, and will also enable official tethering. blackra1n, a jailbreak for 3.1.2, has been updated to RC3, with hacktivation support, 15 second speed improvement, Tiger+PPC support, and installation of the latest blackra1n.app."
"If you are a loyal blackra1n user who kept the blackra1n.app on your iPhone, run it. You will see Icy replaced by an option "ra1n". Install this to upgrade your app. After upgrading, run blackra1n.app again. You will see "sn0w". Install this, and enjoy your unlocked iPhone."
"Go to blackra1n.com, click on the logo corresponding to your operating system, run the app, and click "make it ra1n". When your phone reboots, you'll see blackra1n.app. Run this, install blacksn0w, and enjoy your unlocked iPhone."
"Sometime later in the sn0wday, blacksn0w will be added to Cydia, and instructions will be posted here."
iPhone 2G Users
BlackSn0w doesn't support the iPhone 2G. BootNeuter will work to unlock your iPhone with no difficulties. You can still use BlackRa1n to jailbreak and hacktivate.
Geohot credits ih8sn0w for finding the at+xemn command used to create the unlock.