iRinger is a desktop application that allows you to make and install custom ringtones on the iPhone. from any music or video file, even youtube videos.This works on both iPhone v1.x and iPhone 3G / 2.x. You can download iRinger here.
As seen in the screenshot above the software is supported by Ads. There are 3 main options Import, Preview and Export. While Import allows you to select any audio file on your PC to edit, Export pushes it to the iTunes Ringtones list that syncs with the iPhone automatically.
You can view these custom ringtones in iPhone>Settings>Sounds>Ringtones
The paid version of iringer is for $10 and allows you to add extra effects to the Ringtones like Boost, reverse, Delay etc. Video demo below: