Users commonly jailbreak their iPhones, iPod touches, and iPads to get around the limitations imposed by the wireless carriers (e.g., AT&T) and manufacturer (e.g., Apple). A jailbroken device will allow you to run third party programs and other code, and to do things like tether your phone or use it as a wi-fi hotspot for Internet access on your laptop or other devices. For Android devices, jailbreaking is commonly referred to as rooting.
Potential Issues with Jailbreaking
While jailbreaking makes your device more open and gives you complete control over it, your device may be more vulnerable to malicious apps and stability issues. Apple has long been opposed to jailbreaking (or any "unauthorized modification of iOS") and notes that unauthorized modification of the system is a violation of their end-user license agreement.
In July of 2010, however, the Library of Congress's Copyright Office ruled that jailbreaking your phone is legal, stating that jailbreaking is "innocuous at worst and beneficial at best."
Jailbreaking Apps and Tools
Jailbreaking vs. Rooting and Unlocking
Jailbreaking, rooting, and unlocking are all terms used to describe freeing your phone from its limitations, but they don't necessarily mean the same thing. Jailbreaking and rooting have similar purposes for getting access to your entire filesystem but are used for either iOS or Android, while unlocking is more about being able to use your phone on different networks. Learn more about jailbreaking, rooting, and unlocking here.