It involves signing up for the iPhone prepaid option, activating the iPhone, doing a bit of SIM-card fu, canceling the payment plan, and then enjoying the iPhone's iPod and Wi-Fi functions without the contract.
Sadun's instructions, tests, and results are here.
Update: Tom Merritt tested this out, "borrowing" Jasmine France's iPhone, and it worked smoothly for him. Watch his Insider Secrets video above to see that SIM trick and other SIM-swapping advice for the iPhone.
Jasmine has yet to report whether she received her iPhone back. I'll update this page as soon as that happens.
Update 2: Jasmine received her iPhone back, and then returned it to Kent German's office. All is well.
Update 3: Jasmine France reports that it wasn't her iPhone, and she ain't even tryna hear all that iPhone noise. Pssht.