What is Internet Tethering?

[jopogo]

From my provider terms:
Inclusive Mobile Internet - Mobile internet browsing applies within the UK only. Any use outside the UK will be charged at the relevant international rates. Mobile Internet browsing does not include event charges such as for ringtones or games (transport costs for these events are included). Fair Usage policy of 750MB applies. Not to be used for Internet Tethering (e.g. using your handset as a modem - separate Tethered Data bundles are available). Should you exceed this limit or if such use is detected, notice may be given and Network protection controls applied to ensure the quality and availability of our network to all customers. This may result in, at Orange's discretion, reduced speed of transmission, suspension of mobile internet browsing services and/or suspension of your account.

Is the reqirement of

Internet Tethering required for Bluetooth PAN (please check with your carrier for availability)
referring to this?

If so, I don't think Ill bother purchasing additional bundles just to use the application!

Also can the application ever be developed not to require tethering?

[MobileMouseAdmin]

The application does not require Internet Tethering, it works over WIFI. However, some carriers currently offer Internet Tethering, which allows the iPhone to be networked with the computer using Bluetooth or the USB cable. This is not required, but is a great alternative to WIFI because it doesn't rely on network speed, security, ect. and makes the setup of this program dead simple and less error prone. We hope that someday this will be widely available for everyone to use instead of WIFI.