How to Jailbreak Windows Phone 7

As a special Thanksgiving treat, members of the Windows Phone 7 homebrew community, Rafael Rivera, Chris Walsh and Long Zheng, released a tool for unlocking Windows Phone 7 devices to allow for the installation of unapproved applications. Similar to jailbreaking the iPhone, the new tool disables the controls which prevent "sideloading" apps, meaning loading apps outside of the official Windows Phone 7 Marketplace.
Although the software's developers claim the app is "completely safe and reversible," Microsoft has now released a statement saying just the opposite. Our advice? Proceed with caution, new jailbreakers.

In a blog post dated Nov. 25, Rivera, Walsh and Zheng revealed the release of the new software, called "ChevronWP7." The program, now available for download as an .exe file, lets users install experimental applications on their devices, such as those using private or native APIs (application programming interfaces).
As some folks have pointed out, this tool could also allow for pirating applications (in combination with other hacks). However, the developers have made it clear that they don't support this activity, will not aid in any piracy efforts and that their tool does not, in contradiction to those earlier reports, enable piracy.
But Microsoft has a way to identify devices unlocked using this method, using its PVK system. That system, in which unique device IDs are authenticated by Microsoft servers, could even be used to "blacklist" devices by device ID, it's been suggested.

Will Microsoft actually go that far, though? Probably not, if we had to guess. After all, the homebrew community includes some of Microsoft's biggest fans - alienating them would not be good PR for the company. That being said, Microsoft will probably soon close whatever security holes are being taken advantage of that makes this particular jailbreak software work.
As far as Microsoft's official position on the ChevronWP7 software, a company representative sent blog site WinRumors the following statement this morning, which suggests the company knew a jailbreak was coming:
We anticipated that people would attempt to unlock the phones and explore the underlying operating system. We encourage people to use their Windows Phone as supplied by the manufacturer to ensure the best possible user experience. Attempting to unlock a device could void the warranty, disable phone functionality, interrupt access to Windows Phone 7 services or render the phone permanently unusable.
Microsoft's statement not only acknowledges that they anticipated this activity, the wording of the statement almost seems to imply that Microsoft views this hack somewhat positively... if you read between the lines, that is.
Instead of saying that the tool "breaks," "circumvents," "disables" or otherwise "damages" any of the protections Microsoft has put in place, it uses the phrase "explore the underlying operating system." "Exploring" sounds like something good, doesn't it, if not something downright fun? Microsoft then says it "encourages" people to use the phone as designed, which is a very mild request, to say the least.
Still, the official statement ends with a more dire warning about the consequences for would-be hackers. If Microsoft was to take the actions it warns it could, you could be left with a brick in place of a phone. Given this statement, we can't in good faith suggest that you proceed with the Windows Phone 7 jailbreak, unless you're willing to take on the potential risks of doing so.

How to Jailbreak WP7:

If that's the case, then here's what you would need to do:

1. Download the ChevronWP7 software application from either here or here. (Requires Windows XP SP2, Vista or Windows 7).
2. Launch the application and a window appears, showing two items on a "Preparation Checklist" with checkboxes next to them.
   
3. Read the two items ("ensure your phone isn't PIN-locked" and "install certificate on phone using IE at http://chevronwp7.com/cert") and complete those actions.
4. Check the checkboxes when complete.
5. Click "Unlock"
6. Done!

If you're having issues - and that's not surprising as this is a version 1.0 release, there's an extensive discussion in the blog post comments over on ChevronWP7.com.