For those of you who want to install WiFi tethering on your Nexus One (The open source Android Wifi Tethering app), you will need to root your phone and also install the Cyanogen Mod. Btw, Cyanogen mod is highly recommended as it will turn your regular, stock Nexus One into a super Nexus One. I was reluctant to switch too in the beginning but after switching to Cyanogen mod, I am never going back.
Mind you, the Android WiFi Tether app works flawless, turns your Nexus One into a WiFi Hotspot!