This hardly comes as a surprise as Android is open source, and hackers didn't take too long to crack the closed iPhone system.
The hack allows the user to access the phone as a root/superuser.
The process seems relatively easy, you need to get PTerminal, a command line tool, from the Android marketplace. From there, you navigate to your system/bin folder (where the binaries are kept) and type telnetd to launch the telnet program which lets you login to the phone remotely.
Make sure your Wi-Fi is switched on then type netstat to get your IP address. From there, you just grab a computer on the same network and telnet in. You now have root access to the entire file system.
It is worth noting that this will essentially allow anyone to access the phone as a super user as the phone has no authentication. So it is advisable to shut everything down once done.
At the moment the hack has mainly been used to install applications onto the SD card which is prohibited normally. However it should be possible to use this technique to unlock the phone, allowing you to use it on any network.
It is expected Google/T-Mobile will try and fix this issue ASAP as T-Mobile cover the cost of the phone based on the user being tied into a long term contract.
Personally I think things like this could end up being one of the strong points of Android. When a system can be opened up and customised by individuals it tends to get a huge community following. Just look how many people contribute free work to things like Linux, WordPress and Joomla. Granted Android is quite different than them 3 examples but you get my point.