If you are using an iPhone on AT&T, make sure you have already activated via iTunes.
1) Go into settings > General > Auto-lock > and set it to Never
2) Open up mobile safari and go to jailbreakme.com
3) At the bottom of the page, click Install AppSnapp. It should bring you back to the Home screen, and will take up to 5 minutes, so do not touch or do anything.
4) Once your iPhone gets a confirmation call, answer it and the iPhone will freeze.
5) Hold down the Power button and restart it.
6) If it was successful, you should be on your home screen and you should see the Installer app icon there. Congratulations, you have Jailbreaked and Activated your iPhone.
Note: If this method does not work for you (freezes and doesn't work after reboot), either restore 1.1.1 and try it again or use one of the other jailbreaking methods.