While many folks enjoy the iPhone and all of the apps that are available for the device from iTunes or Apple’s App Store; there are people out there who want to do more. The only way to run software on your iPhone that isn’t available from iTunes is to run another operating system other than Apple’s iOS on the phone. The process of installing and running another operating system on an iPhone is known as ‘jailbreaking’ (see this great post at iphonehacks.com for more info).
Who does this? People who want to listen to music obtained from sources other than iTunes (DRM free). People who want to run apps that Apple has not approved. And then there are people who obtained their iPhone through other than normal commercial channels.
The downside to jailbreaking used to be that you had to trust whoever wrote the new operating system and whatever apps you wanted to run. That’s not Apple. If you jailbreak you can’t take your phone to the Apple Store for help or service. You also can’t use iTunes or the App Store to use iOS apps.
When you read about iPhone ‘hacks’ or attacks it is important to find out if they are against iOS or jailbroken devices. Often these hacks and even research (see touch logging) into how to attack iPhones are against jailbroken devices.