On July 26th, the Librarian of the Library of Congress allowed that jailbreaking is not an infringement of the DMCA.
and an excerpt:
Persons who circumvent access controls in order to engage in noninfringing uses of works in these six classes will not be subject to the statutory prohibition against circumvention.
(2) Computer programs that enable wireless telephone handsets to execute software applications, where circumvention is accomplished for the sole purpose of enabling interoperability of such applications, when they have been lawfully obtained, with computer programs on the telephone handset.
See the Wiki page on jailbreaking the Apple iOS.
What will be the effect of this? I have already heard of a web site you can display in Safari on your iPhone that will allow you to jailbreak it with the push of a button. <Jailbreakme>
Will there be competing App Stores? A lot of people don’t like to use iTunes, now can there be alternatives? Bittorrent app on your iPad?
An iPhone is a wireless telephone handset so it would be including in this decision. How about an iPod touch? An iPad with or without 3G. An iPod touch or iPad with a skype app or installed? Or, actually, I would think that having the Facetime app installed (or similar, competing) makes anything a wireless telephone handset.
Seriously, it would be nice to be able to develop an app, using Xcode, package it and distribute it to your friends without going through the Apple app store. Or conduct a Beta test with a large group of people all over the world.