question for UK O2 customers, is tethering actually completely free as part of the data package or does it eat into the 500mb limit for example
Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A334 Safari/7534.48.3) It eats your limit
Free tethering means you don't need to pay for an extra package, it just uses up your data allowance.
As others have said above - O2 simply allow tethering automaticall: The data you use comes out of your data allowance, be it 500mb, 1GB, etc. Any add-ons you add to your data package are also available for tethering.
Just a couple of notes on this. You have to be on a "current" package for this to work (one that started since about March 2011). If you are on an older tariff, it might not include tethering. Once you hit your data limit, O2 will slow your connection speed down quite substantially for the rest of the month. There isn't an additional fee. If this happens, you can choose to pay for a one-off data bolt on.