1. I am happy to provide this information, but you have to use it at your own discretion. I am not responsible for any problems you may encounter with your computer, your iTunes, your iPhone, or any other electronic device even surrounding said items.
2. I am not your tech support. I will answer questions (if there are any posted in the comments) to the best of my ability a) if I know the answer and/or b) if I feel like it.
3. I tested this on my MacBook Pro using Leopard, iTunes 8, and my original iPhone ((no iPhone 3G for me )) I also tested these steps on my PC using XP and iTunes 8.
4. No animals were hurt during this process.

The Steps

Step 1: Paging Captain Obvious! Step 1 is to determine what song you want to use. NOTE: This process will not work for songs actually purchased through iTunes. If you ponied up the cash for a song in iTunes, pony up the additional $1 to create a ringtone.

Step 2: While listening to the song, note the start and stop times of the snippet you’d like to use. You’ll need to keep this gem shorter than 40 seconds.

Step 3: When you’ve determined the length of your ringtone and are armed with the start and stop times, right-mouse click on the song in iTunes, select “get info” and then the “options” tab.

Enter your start and stop times in minutes:seconds (like 00:10) and click “ok”.

Step 4 ITUNES 8 OR OLDER: Right-mouse click on the track again and select “create AAC version”. This will create a new file with just the snippet of time you selected. It does not modify your original in any way.

Step 4 ITUNES 9: With the music track selected, click on “Advanced” in the menu bar and select “Create AAC Version”. This will create a new file with just the snippet of time you selected. It does not modify your original in any way.

Step 5: When the “duplicate” file appears in your iTunes, right-mouse click on it and select “delete”. Click on “remove” for the first pop-up asking if you are sure you want to remove the song from the playlist. Then click on “keep file”. DO NOT send the file to the recycle bin.

Step 6: Now you need to find the new file, which was saved in the same place as your original file and has the exact same name, with a few exceptions. ((The fact that you’re following these steps leads me to believe you know a little somethin’ somethin’ about your computer and where your files are stored. If not, leave a comment and I’ll try and help.))

1. The new, snippet version will have a file extension of .m4a.
2. If you are using a song that you ripped from a CD using iTunes and all of these files have the .m4a extension, don’t fret. Your snippet is the one with a 1 appended to the file name.

Step 7: Once you’ve located your new snippet .m4a file, change the extension to m4r. You’ll be warned this will self-destruct your computer. Do it anyway.

Step 8: Only 6 more steps to go. Kidding! Now just double click on your .m4r file and it should open in iTunes under ringtones, and be ready to sync.

Step 9: Sync.

These steps actually work. ((At least they did for me and Topsurf!)) I hope someone else will find this handy. Now go forth and (ringtone) prosper!