• The iPhone goes into Emergency mode – it shows the USB cable graphic on the home screen, and will only allow emergency calls.
• In iTunes, the iP{hone is recognised, but iTunes asks you to put in a valid SIM before you can do anything with it.

Here’s how to fix it:

• First, you will need redsn0w, the jailbreaking app
• You will also need the IPSW file for your current firmware version and the bootloader files, all of which can be downloaded here

The run redsn0w, and follow the prompts! The only trick is that redsn0w 0.8 will not recognise the IPSW for 3.0.1, but you can just use the 3.0 IPSW instead. Some good step by step guides are here and here.

NB: you can use redsn0w to just unlock the phone, you don’t have to install Cydia or Icy if you don’t want to. To just unlock the iPhone for use with other networks, just untick the boxes for Cydia and Icy, and tick the box for Unlock in redsn0w.

Good luck!