Tethering allows laptop users to access the mobile Internet through their smartphones, rather than a separate wireless modem. I use a wireless modem nearly every day, and would much prefer to simply use my phone instead. Alas, the option isn't available. Yet.
WiFi Tether for Root Users gave HTC G1 users exactly that power, the ability to access the Internet through their phones. According to Google, that's a no-no.
T-Mobile, seller of the HTC G1 here in the U.S., also says it is a no-no, and plainly states that tethering isn't allowed. It notes in its terms of service:
It was probably T-Mobile that pressured Google to remove the tethering app once it realized what the app was being used for. We can only hope that everyone involved here (the network operators, device makers, and software providers) can come up with the best solution or set of solutions to allow smartphone users to tether their devices.
Your Data Plan is intended for Web browsing, messaging, and similar activities on your device and not on any other equipment. Unless explicitly permitted by your Data Plan, other uses, including for example, tethering your device to a personal computer or other hardware, are not permitted.