"Tethering" is the use of your cell phone (or other mobile device that's connected to the internet) as a modem for another device, usually a laptop or a Wi-Fi-only tablet. This gives you internet access on the go, wherever you are--e.g., if you're trying to work at a hotel that doesn't have free Wi-Fi (shame on them!) or your internet access at home is down for some reason. You connect your phone to your laptop or tablet either directly with a USB cable or without wires through Bluetooth or Wi-Fi. (In the good old days, we tethered devices via infrared.)
Benefits of Tethering
Tethering enables us to go online from our laptops, tablets, and other mobile devices like portable gaming systems even without a built-in 3G or 4G mobile data plan. It's especially helpful in situations where there's no other means of Internet access: when there's no Wi-Fi hotspot like a Starbucks around, for example, or your cable modem goes on the fritz, or you're on a dirt road in the middle of nowhere and need an online map quick...you get the idea.
If you're already paying for data service on your cell phone and your wireless provider doesn't require any extra fees for using your cell phone as a modem for your laptop, tethering can also save you money, since you won't have to pay for separate mobile broadband service or buy additional hardware just to get your laptop connected.
You can also surf the web more securely using a tethered cell phone, because your information is being sent directly through the phone versus, for example, over a public open wireless hotspot.
Finally, tethering could help you conserve laptop battery power, because you can turn off Wi-Fi on your laptop while you use your phone as a modem (that is, if you make the connection over cable rather than wirelessly).
Tethering Issues or Obstacles
Using your cell phone's data service for your laptop will, however, drain the phone's battery more quickly, especially if you're using Bluetooth to connect your phone and laptop. If you have a USB port on your laptop that can charge devices, tethering via USB would be a better way to connect than doing it wirelessly, because of that battery issue.
Also, keep in mind that the speed you get on a tethered device may not be as fast as you might expect even on the cell phone itself because the information has to take that extra step over the air or through the wire (USB connections will generally be faster than Bluetooth). With 3G service on your handset, upload and download speeds will typically be less than 1 Mbps. If you're in an area not covered by mobile broadband, you'll likely get speeds only a few times faster than dial-up.
Depending on your particular phone and connection method, you also may not be able to use your voice service on the cell phone (such as getting calls) while it is tethered.
The biggest obstacle, though, is just being able to tether your cell phone to your laptop at all. Each wireless carrier has a different set of rules and service plans for allowing tethering, and each cell phone device may have its own limitations. How to tether your cell phone will largely depend on your cell phone service provider and your cell phone model. The major wireless carriers in the US are now charging extra monthly fees just to tether your phone or use a phone as a Wi-Fi hotspot for more than one device to go online.
More: Learn how to tether your cell phone to your laptop on AT&T, Verizon, Sprint, and T-Mobile networks