The United States Copyright Office ruled that jailbreaking an iPhone is not a copyright violation under the Digital Millenium Copyright Act (DMCA). Be that as it may, there are still some very good reasons not to jailbreak the iPhone.
1. Stability. There is a reason that Apple is so protective of the iPhone hardware and software. It is dedicated to providing a stable mobile platform with an exceptional user experience. The controls put in place by Apple may appear overbearing or draconian to some, but they do serve the purpose. Jailbreaking the iPhone can result in stability and performance issues impacting the functionality of the device.
2. Warrranty. Although the United States Copyright Office has given the act of jailbreaking a legal thumbs up, that doesn't mean Apple has to support it. Sure, Apple can't prosecute jailbreakers or put anyone in jail for copyright violations as a result of jailbreaking, but users that do so will be doing so at their own risk. Once the iPhone is jailbroken, Apple will no longer honor warranty support.
3. Security. Apple does a fair job of protecting the iPhone through its limited multitasking implementation, and by policing what is available from the App Store. Once the iPhone is jailbroken, the gloves are off and you're on your own. Poorly coded apps, or intentionally malicious apps might be available in the iPhone app black market and able to run silently in the background compromising the data on your iPhone.
4. Legality. While jailbreaking has been deemed legal from the perspective of the United States Copyright Office and the DMCA, it doesn't mean there aren't other laws and regulations that might be used to pursue jailbreakers. For example--although jailbreaking is OK, distributing tools designed explicitly to enable jailbreaking is still a violation. That is just one example, but suffice it to say that there are other legal angles to pursue if Apple decides to get creative.
5. What's the Point? Seriously. There are 200,000 apps in the App Store. Other than just to prove you can, or on principle because you don't want Apple telling you what to do with your smartphone, why bother? Is the ability to use the iPhone as a Wi-Fi hotspot really worth breaking the warranty, reducing the stability and security of the iPhone, and possibly bricking the device?
Despite the DMCA seal of approval, the risks and consequences of jailbreaking the iPhone far outweigh the potential benefits. If the restrictive nature of the Apple iPhone culture really bothers you that much, just get an Android smartphone instead.