One of the reasons I bought an android phone in the first place was my intention to set it up so I could connect to the phone using wifi and share the 3G data connection to the Internet with PC, laptop, iPod Touch...whatever.
It took me a few months, but I finally loaded a rooted custom ROM and set my phone up as a wifi access.
None too soon as it turns out. Our Telecom landline fell over last night and took the DSL with it. The only way to access the Internet is via the cell phone.
I have a fairly large data quota on the phone, so it's an excellent Plan B for when the main connection fails.
Not sure what happened to the landline, but Telecom had someone around here within an hour - on a Saturday. Must be their "fault".
I'm running Cyanogen Mod 4.2.5 on an HTC Magic 32B. The wifi tethering is handled, in this case, by a free app called "Wireless Tether for root users". Had to use it to do this post!
Here's a screenshot from my phone: