Disclaimer: I barely know what I’m doing with some of these steps.  My phone didn’t get bricked, but I make no promises about your phone.  Please proceed carefully.

These instruction assume you got your phone like I did (from google.com/phone (retail version))

Step 1:  You need some files from the Android SDK.  I got it here. You will want to copy the files from the tools folder into the folder you unzipped the unlocking files for Step 5.

Step 2: You need to enable USB debugging on your Nexus One.  Home Page -> Menu -> Settings -> Application Settings -> Development -> USB debugging

Step 3: You will need to install the drivers for the Nexus One (Windows Users Only.  I don’t know what is needed for OSX).  Plug in your phone via USB to your Windows XP 32-bit system, and when the computer asks you for the driver, point it to the  “usb_driver/i386″ folder inside the Android SDK folder.

 Step 4: Power off your Nexus One.

 Step 5: Push on the trackball, and without letting go of it, tap on the power button.  Keep holding the trackball till you see a console-like screen with Androids on skateboards.

 Step 5:  The phone needs to be unlocked, and now you are ready to follow.  Here is the page I used for that.  

 Step 6: Reboot your phone normally.  You will be shown a screen that that asks you if you are sure you want to do this.  Saying yes will reset your phone, and you will lose all of your customizations and downloaded applications. (Everything on your SD card will remain)

 Step 7: Take a moment to confirm your phone is working well.  It’s not a needed step, but it made me feel better.

Step 8: Time to go back to scary stuff.  Go to here and follow the instruction.  Before executing the instructions, you’ll need to plugin your phone, and repeat steps 4 and 5.

Step 9: Reboot your phone normally.  In the app tray, you should find an app called Superuser Permission.  As far as I can tell, clicking on it will only give you a blank screen, but I treated it as a sign so far everything is working.

Step 10: You need a new Kernel.  I followed the steps from this Google code group.  The instructions can be found here .  I used the second series of instructions found on the page  (Instructions for user build (with root hack only)).

I was having issues with these steps at first, adb commands kept saying device not found and fastboot failed reporting too many connections.  Rebooting my phone into bootloader mode (steps 4 and 5) fixed that for me.  NOTE: Step 5 of the instructions should read “fastboot flash zimage nexusone-zimage“

 Step 11: Download the wireless tether app from here  and the wired version from here.  Boot your phone normally and connect it to your computer.  Copy the two apk files to the root of the SD card (the drive that Windows mounts)

 Step 12: Using your phone, search for “appsInstaller” in the Android Market.  Download and install this app.

 Step 13:  Run AppsInstaller and select the two applications you copied to the phone.

 Step  14: Enjoy and donate to the people that made this happen.  Without people like them, people like us couldn’t do cool shit like this. The following three links have Paypal donation for their efforts:  Unlocking and Super User Access, New Kernel and Wireless Tether, and Wired Tether

Final Note: If something isn’t working right, I doubt I’m going to be much of a resource, beyond the documentation I wrote above.