Nick Lee’s Handy Light app, which looks like any other flashlight app that uses the iPhone’s screen to provide illumination, actually camouflages a tethering feature using the SOCKS proxy, à la Nullriver’s Software’s NetShare app that was available for a short time nearly two years ago. The app just hit the App Store a little while ago and costs a mere $.99.

For those unfamiliar with tethering, it allows you to use your iPhone’s cellular data connection on your computer or other devices via Wi-Fi. In the U.S., AT&T requires an additional $20 per month for this feature, and you must be on the most expensive data plan that costs $25 per month (unless you were grandfathered into the unlimited $30 data plan offered previously). We’ve tested the app and it works as advertised, bringing unofficial tethering to any iPhone running iOS 4.

Lee has posted a YouTube video demonstrating how the app works:

In case you don’t want to watch the video, the instructions are as follows:

Set up an ad hoc Wi-Fi network on your computer (network name and password requirement are not important). Connect to the Wi-Fi network you just created on your iPhone through the Settings/Wi-Fi menu. Tap on the blue arrow to the right of the selected Wi-Fi network, click Static in the IP Address menu and enter the following IP address and chuckle at its geek quotient: 13.37.13.37 Next, enter 255.255.255.0 in the Subnet Mask field. Back out of the Settings menu to ensure these settings are saved (though hitting the Home button right away shouldn’t change them). Go to your Mac or PC and change the network settings to use the SOCKS Proxy and enter 13.37.13.37 as the Socks Proxy Server address and 1337 as the port. On our Mac laptop, this is what the resulting screen looks like: Be sure to apply/save these settings. Go back to your iPhone and open the Handy Light app and tap the flashlight colors at the bottom in the following sequence: blue, yellow, red. Then tap the top right corner of the screen and the color should change to purple. Your iPhone is now capable of sharing its internet connection with the computer you set up. Leave the app open and go to your computer and start browsing. As the video describes, we found that it took a few seconds for the connection to kick in but then it worked like a charm. Though many variables affect network speed tests, a quick test using Speedtest.net yielded 3.92 Mb/s down and 0.38 Mb/s up while tethered to our iPhone 4 through Handy Light.

Of course, while we felt it was important to get this news out to you, it’s almost guaranteed Apple will remove this app from the App Store once the company learns of this hidden feature. Hopefully, this won’t happen too soon and everyone can enjoy the tethering feature this app offers for a mere $.99 (comparatively, NetShare cost $9.99 when it was available). Now, what are you waiting for? Go buy Handy Light and get your tethering on! Those of you on metered data plans should be careful tethering with this app, however, since this can quickly eat up your data allotment. Also, since you need to keep the app open for it to keep working and the 3G radio in your iPhone takes a lot of power to run, this will likely drain your battery pretty quickly so be prepared and make sure your iPhone’s AC charger is close at hand.

UPDATE: It looks like Apple has removed Handy Light from the App Store so it is no longer available for purchase.

UPDATE 2: There have been a few impostor apps in the App Store with similar names but these DO NOT offer tethering ability, hidden or otherwise. We strongly urge our readers to not buy any of these impostor apps since these developers seem to be trying to take advantage of the original Handy Light’s fame while not providing the same hidden functionality.

If you didn’t buy Handy Light when it was in the App Store on July 20, 2010, you’re out of luck, unfortunately.