Jailbreaking your iPhone will allow you to bypass Apple's restrictions and allow you to install 3rd party applications from other app creators.  App stores like Cydia and Icy have really cool applications that AT&T restricts.

Spoof app is one of my favorites.  It allows you to call someone and pre-program in the phone number you want the other person to see!  A lot of fun can be had here... or you can catch an un-suspecting someone by pretending to be that person :)  hehehehehe.

Jailbreaking your iPhone is completely legal and has not yet been ruled a violation of DMCA (Digital Millennium Copyright Act).

There are a lot of reasons to jailbreak your iPhone.  In addition to 3rd party applications, you can also customize the look of your iPhone by changing the style of the icons and pages, customizing your ringtone and SMS tones, and allowing full 3g access to applications that apple or AT&T would otherwise restrict.

There are an estimated 4 million + iPhones jailbroken with thousands and thousands more each month.

Unlocking your iPhone is different from Jailbreaking.  Unlocking simply allows you to connect your iPhone to a service provider other than AT&T.  It would allow you to connect to T-Mobile, or any other GSM network.  AT&T is a GSM network, like T-Mobile... where Verizon, Sprint, etc..are CDMA so you can not connect an iPhone to those networks....YET. 

There are tons of companies that will assist you with jailbreaking your iPhone.. in fact they are usually automated, taking the tech work out of the equation so you dont have to stress.  There should be multiple companies listed on this page that will jailbreak your iPhone for you.