"Tethering" is the use of your cell phone -- or other Internet-enabled mobile device -- as a modem for another device, usually a notebook or PDA. The connection is made either with a cable (USB or serial) or wirelessly through bluetooth or Wi-Fi (or, in the good old days, via infrared or IrDA).
Benefits of Tethering
Tethering enables users to go online from their laptops or PDAs 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 cellular 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.
You may also conserve some laptop battery power, because you can turn off Wi-Fi on your laptop while you use your tethered cellular modem (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. If you have a USB port on your laptop that can also charge devices, tethering via USB would be a better way to connect.
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). Even 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.
You also may not be able to use your voice service on the cell phone while it is tethered, depending on your particular phone and connection method.
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.
More: Learn how to tether your cell phone to your laptop on AT&T, Verizon, Sprint, and T-Mobile networks