3G is the third generation of mobile phone standards and technology. Just like EDGE, it's a method of providing a mobile internet connection. It is twice as fast (if not more) as EDGE, and has connexion speeds similar to broadband. 3G includes HSPA (High Speed Packet Access) data transmission capabilities and is able to deliver speeds up to 14.4Mbit/s down and 5.8 Mbit/s up.

Whether a device has EDGE or 3G is determined by the hardware inside the phone. The difference between an iPhone 3G and an original iPhone which gives it 3G speeds is an actual chip. (That should settle the questions like, "How do I hack my original iPhone so it can have 3G?"...You can't.)