iPhones can run unsigned apps after only a few minor changes, even if they're not jailbroken. The most games and popular apps are widely available through the typical piracy channels.

I don't get it either. My guess is that people install a cracked version through Cydia to use on a jailbroken iPhone. I'd love to have this confirmed though.

You can't install cracked stuff through Cydia, you have to use something like installous via hackulo.us.

There are various ways but you might look at this for ease of use: http://en.wikipedia.org/wiki/Cydia_%28application%29 (nearly 500k daily visitors sounds like it is pretty popular)

not to encourage, but You simply jailbreak the iphone, once you have Cydia - then find read up on installous (which is a pirate version of the appstore) works up to 3.0 and had 90% of the most popular apps.