Tethering is when a mobile phone (traditional or smart phone) is used as a modem for a computer. This is usually done by installing a PC suite on the computer being used, to enable the PC to read the phone and use it for internet connectivity, via a USB cable. Tethering can be used on any kind of compatible computer, but it is more practical for use on laptops than on desktops because of its mobile nature.

iPhone tethering is when the mobile device being used is an Apple iPhone. iPhones have 3G modems built in which allows it to access the internet even without Wi-Fi. The same can be done for a laptop by connecting it to the iPhone. With iPhone OS 3, tethering isn’t allowed in the US by any carrier (while many other carriers outside of the US do), and the only way around it is to jailbreak the iPhone. With the release of iPhone OS 4, tethering was finally allowed through AT&T with a service fee of $20 per month.
iPhone cannot be tethered to the earlier iPad version to enable it to have 3G connection, which is a disappointment for those who would like to have 3G connection to their Wi-Fi only iPad units.