Tether your Android phone for free
Android Tethering: Preparing Your Phone
All right, ready to get on with it? There are several ways you can go about tethering your Android phone. I'm going to focus on the one I've found to be the quickest and easiest, not to mention the least wallet-draining (you know, because it's free).
First, head over to the Android Market and search for "PdaNet," or scan the barcode at right for instant access. Go ahead and install that bad-boy to your phone.
Now, on whatever computer you want to use for tethering, click over to the PdaNet Web site or DanielCastrellon.com and download the companion PC program. You'll find options for Windows XP, Windows Vista, Windows 7, and Mac OS 10.5 and 10.6. The basic edition of the PdaNet PC utility is free, though if you need to access secure (https) Web sites during your tethering, you will have to spring for the paid edition.
Android Tethering: Starting Your Connection
Once you're ready to actually begin a tethering connection, you need to adjust one little setting on your Android phone: Tap your phone's Menu key and select Settings, then Applications, then Development. Now check the box that says "USB Debugging" and press "OK" when the confirmation box appears. This will allow the PdaNet app to directly stream data from your phone to your PC. Be sure to go back into this same menu and turn it off when you're done using the tethering function.
At this point, you're ready to plug your Android phone into your PC via USB. Once it's connected, run the PdaNet app on your phone and select the "Enable USB Tether" option on the program's main screen. (You'll also notice an option for Bluetooth-based connections; if your computer has Bluetooth capabilities, you can select this to connect to your PC wirelessly instead of using USB.)
The app will now tell you that it's on and running as a background service. Next, just head over to your PC and find the PdaNet icon. On Windows machines, it'll be a rectangular cell-phone-like symbol in your system tray. Right-click the icon and select "Connect" from the pop-up menu.
That's it -- you're done! Your PC is officially tethered to your Android phone, and you should be able to surf the Web at will using your phone's 3G or 4G connection.
AND you can use your computer to send SMS msgs thru your phone!!!
That, my friends, is Android power.
This was found on computerworld.com