[rainfreak]

That is correct, the iPhone will not allow you to use MP3 files for ringtones, it requires them to be in the m4r format. For me, it is easy because I have a Macbook Pro and use a free converter called Switch. I know there are a couple of good converters that can run on the iPhone, but it isn't that easy. You still need to drag the converted files into the ringtones folder of your device in iTunes to be able to choose them on the phone.

However, with all of that said, I found a cool way to do it for free in iTunes on any platform. I'll work up a tutorial with screen shots and post it shortly.