Custom firmware is a hacked or patched version of the iPhone firmware that can be restored to your iPhone directly through iTunes. If your iPhone is not an official set (does not require sign-up from the telecommunication service provider), your iPhone will be activated and jailbroken once the restore is completed. But, custom firmware doesn’t unlock the iPhone, you’ll still need to unlock it manually by installing the software unlocking tools such as, BootNeuter (iPhone 2G) and ultrasn0w (iPhone 3G/3GS). You can install the tools from Cydia installer by adding its’ repository to Cydia source.
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