The Pwnage Tool by the DevTeam hacker group allows you to create custom iPhone firmwares for the purpose of jailbreaking, to get full control over your device (see why you should jailbreak here).
Remember the ApplePeel 520? It was basically an iPod Touch case that contained a cellular radio: plug it into your jailbroken iPod Touch and you could transform it into an iPhone… or at least make or ...