Once Apple announced Personal Hotspot, the new iPhone 4-only feature, a lot of potential iPad buyers started asking the same question. "Can I use this feature with a Wi-Fi-only iPad and avoid paying extra for a 3G-enabled iPad, plus another monthly data plan for it?"
Indeed you can. With Personal Hotspot activated on an iPhone 4, any Mac or iOS device will treat the iPhone 4's Wi-Fi broadcast like it's a standalone base station. This means if you have an iPhone 4 and a Wi-Fi-only iPad, you can "tether" your iPad to your iPhone's 3G data connection for the first time.
"Awesome! So this means if I have an iPhone 4, there's no reason to get an iPad with built-in 3G, right?" Well, no, that's not necessarily true. I can think of three things you lose if you go Wi-Fi-only with your iPad and keep it tethered to your iPhone 4.
1. GPS. Only the 3G models of iPad have built-in GPS functionality. The Wi-Fi models can approximate your position using Wi-Fi, but it's almost never as accurate as with GPS. "Well, so what," you might say. "If I've got my iPhone right there, what do I need GPS on my iPad for?" That depends on how important GPS functions are to you. If you hardly ever use apps that depend on location-based services, you probably won't be missing out on much. If you're like me and you use location-based apps all the time, having to sacrifice GPS functionality on one of your iOS devices might be more trouble than it's worth.
2. Longevity, by which I mean the amount of time you can use the iPad in a single session. The 3G version of the iPad 2 is rated for nine hours of battery life when surfing over 3G. When using your iPhone 4 as a Personal Hotspot, you can expect the iPhone 4's battery to last for only about five hours before it needs to be charged. Granted, you can bring along the iPhone 4's charger, plug it in, and use Personal Hotspot as long as you like. However, the charger and cable are just two more things to carry, finding an unused outlet isn't always easy when you're on the go, and having your iPhone plugged into the wall quite literally tethers you to one spot. That leads into the third thing you give up if you go the Personal Hotspot + Wi-Fi iPad route...
3. Flexibility. If your iPad doesn't have its own 3G capability, it's totally dependent on your iPhone's Personal Hotspot unless you can find another Wi-Fi source. If your iPhone's battery dies, or if you forget your iPhone in a bar and some unscrupulous wag pockets it, your iPad loses all of the versatility it gained through Personal Hotspot.
The iPhone's data plans aren't anywhere near as flexible as those on the iPad, either. For one thing, in most countries the iPhone is locked to whatever carrier you buy it from; the iPad has no carrier locks whatsoever, and you can roam between carriers (or between countries) at a whim. Not only that, in several countries (most notably the US) you'll pay an extra monthly fee to enable Personal Hotspot on your iPhone 4. In the States this comes to $20 per month, which gives you an extra 2 GB of monthly data, for a total of 4 GB per month on your iPhone's plan.
On a US iPad plan, you'll get 2 GB of data for $25. That's $5 per month more expensive than enabling Personal Hotspot on the iPhone, but you can manage the iPad's data plan on a month-to-month basis -- no contracts to sign, and no obligations to any carrier. Most carriers also offer cheaper iPad plans with lower monthly bandwidth caps, which should satisfy most users' data needs.
Personally, I'm still getting a 3G-enabled iPad 2. I may never actually use its independent 3G capabilities since the iPhone 4's Personal Hotspot costs nothing extra through my wireless provider, but I'd rather know that I could use the iPad's own 3G if I needed to.
Update: Many commenters have pointed out that Apple's Canadian website contains the following verbiage on the iPad 2's 3G capability, which at first glance seems to indicate the iPad 2 may be carrier-locked in Canada:
If you decide on an iPad with Wi-Fi + 3G, be sure to select the model that corresponds with the carrier you'd like to use for 3G service. The iPad model you purchase is specially configured to work with either Bell, Rogers, or Telus. So while you don't have to activate 3G service right away, you should choose your iPad with Wi-Fi + 3G according to the carrier you prefer.
Website iPhoneinCanada has confirmed directly with Rogers itself that the iPad 2 will not be carrier-locked in Canada. And despite similar wording on the US Apple Store urging buyers to decide between an AT&T iPad or a Verizon model before purchasing, the situation for the iPad 2 in the US remains the same: the AT&T iPad 2 is not locked to AT&T. iPhoneinCanada verified this by calling Apple directly; I just got off the phone with AppleCare myself, and they confirmed that just like the original iPad, the iPad 2 will not be locked to any specific carrier. Therefore, if you're like me and you live in a country where the iPad 2 won't be released until after March 11, you can still order an AT&T model iPad 2 from the US site without fear of having to jailbreak the thing in order to use it in your home country.
The AT&T versus Verizon iPad 2 situation is a matter of the hardware differences necessary to access the different networks, not a case of the iPad being artificially locked to one carrier or another. It's unclear why Apple chose to word things the way it did on its Canadian site (no other country's site contains similar wording), but the Canadian carriers themselves have stated the iPad 2 won't be carrier-locked.