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How do I create an ad-hoc network on my computer?

On Windows XP,

Go to Control Panel->Network Connections, then right click on Wireless Network Connection and select Properties from the menu.
Select Wireless Networks tab, under Preferred networks, click Add.
Give a name to your network in the SSID box such as "iPhoneNet".
Check "This is a computer-to-computer (ad-hoc) network and select "OK" to close the settings.
Now on your iPhone go to Settings->WiFi and "iPhoneNet" should show up in the list unless your computer is already connected to a router. Tap on it and your computer should go online.
On Mac,

Click on the Airport icon at the top of the screen.
Select Create Network, give it a name such as "iPhoneNet".
Now on your iPhone go to Settings->WiFi and "iPhoneNet" should show up in the list. Tap on it and your computer should go online.
On Vista,

Right click on the network tray icon at the bottom of the screen.
Select "Connect to a network", then "Set up a connection or network".
Select "Set up a wireless ad hoc network and "Next", then enter a Network name such as "iPhoneNet". Also check "Save this network".
Now on your iPhone go to Settings->WiFi and "iPhoneNet" should show up in the list. Tap on it and your computer should go online.
WEP network key is optional but strongly recommended. (Remember all computers/iPhones nearby can see your computer and connect to it.)

Potential trouble-shootings:

If you have created ad-hoc network before between your computer and your iPhone (in order to use other tether apps or access the phone from the computer), it is very possible that you have assigned static IP addresses. You need to undo that and go back to "Obtain an IP address automatically" (aka DHCP) on both ends.

To verify that your computer is connected to your iPhone properly, the DNS IP of your computer should become 68.28.122.93. If it is empty or has a different value, then it means DHCP hasn't done its work and you need to connect again.
If "Acquiring Network Address" takes longer than 10 seconds on the computer, something may be wrong with the WiFi signal and you should try to disconnect and reconnect.
If you are able to connect WiFi but your computer could not open any web pages, try to open the Weather app on the iPhone and see if the signal icon turns into "3G" on your iPhone. If the Weather app fails to update eventually then something is wrong with either the WiFi settings or the data signal.
Having slow data connection? PdaNet connects as fast as your iPhone does and our testing shows at least 1.2Mbps at one occasion. But "3G" is not always "3G" - there is a time and there is a place :-)