Options that require Jailbreak
" SSH/File Transfer: All you have to do is drop an iPhone's iPod-compatible ringtone into the /Library/Ringtones directory, meaning you can use MP3s, AACs (protected and unprotected), or M4As. Anything that your iPhone's iPod supports will work.
" iBrickr (Windows): iBrickr actually transcodes your sound files for you, so if you're looking up old WAV sound pages from 1999, iBrickr can convert them into something that the iPhone understands before syncing. [iBrickr]
" iFuntastic (Mac): Same as the SSH/File Transfer option. Just drag them into the correct /Library/Ringtones folder. [iFuntastic]
" Sendsong: Allows you to pick any song from your iPod and move it into the Ringtones section. Install this with AppTapp.

Options that don't require Jailbreak
" iTunes Music Store: You can manually place AAC files into the correct iTunes Ringtones folder as long as it has the right file extension. Works with purchased iTunes songs or songs you've converted to AAC format. [JoeMaller]
" Rogue Ameoba's MakeiPhoneRingtone (Mac): This takes advantage of the iTunes 7.4 and iTunes 7.4.1 ringtone file compatibility workaround to get the Ringtones show up in iTunes. All you have to do is drop in an AAC file, which can be one of your songs purchased from iTunes. [MakeiPhoneRingtone]
" iToner (Mac): Copies ringtones to your iPhone, bypassing iTunes, should be guaranteed to work with future iPhone updates. Costs $15. [iToner]
" iPhoneRingToneMaker (Windows): Transfers ringtones to your iPhone, but lets you edit them beforehand in its editor so you can chop down long songs to a manageable clip. [efksoft]

We recommend you use one of the free methods, since they're actually quite easy to do. Even if you don't want to jailbreak your phone, the iTunes Music Store manual method and Rogue Amoeba's MakeiPhoneRingtone can take care of this for free. But if you want to make sure your ringtones don't get deleted when a new version of iTunes or iPhone Firmware comes out, you may want to try jailbreaking and placing the songs into the ringtones folder manually.

Obligatory iPhone Book Whoring: These iPhone Ringtone features are covered in my book, How to Do Everything With Your iPhone, along with hacking, cracking, and much more. Don't worry, that cover is going to be changed. Soon. *Sends nagging email to publishers*

Additional research by Benny Goldman

•Support for installing apps via the file manager, no restart necessary.
•(Was the previous "Browser" renamed to stay clear of Apple?)
•Support for multiple pages on the home menu.
•Native ripping of the iTunes music store previews into ringtones from a store playlist.
•Text editor for text files on the iPhone.
•Replace menu background image.
•Instead of "jailbreaking" a phone it "unshackles" it. Apparently this method no longer requires iTunes to be shut down while you tinker.
•Don't click the iFantasy theme!
[Download]

Stick it to the carriers who overcharge for ringtones of songs you probably already own! Not only is iTunes sourcing the ringtones, but the 30-second clips are generally the best parts of the song for ringtone use. I hope Apple rewrites the way ringtone sales are done the same way they made paid online music a satisfying experience, but until then, it's going to be a repeat of the Napster scenario. [TUAW]