Jailbreaking is process of removing limitations placed by Apple on devices such as the iPhone and iPad, usually by installing a program for doing this.
It is commonly done in order to install programs, such as MyWi 4.0, that Apple censors and will not place in it's app-store.
The trade-off is that once you are getting unexamined programs, you could unwittingly install software that destabilizes the system, or is malevolent. Auto updates will also no longer work.
Jailbreaking is legal in the U.S., and if you could always restore the device to its' original settings, or to a backup of the device before you jail-broke it, if you don't like the results. Just be sure to do a backup before you start.
If the only reason you want to jailbreak is to avoid tethering fees then be warned that carriers can detect that you are using it for that purpose and may elect to charge you as though you ordered the service. If you are on a grandfathered plan for unlimited then this is an issue, since if you lose the plan you will not be able to get it back, otherwise don't worry about it.
My nephew, who is an IT major, even rigged his iPhone 4 so it can dual-boot (switch) between being an iPhone or an Android, depending on what he wants to do.
If you decide that you want to give it try, let me know, and I'll try to come up with more specific instructions
David