There are several all out there that helps set and modify MP3 as ringtone, i personally like Ringdroid, it allows you to choose the mp3 and set it as a ringtone or notification sound at the end.
All above are by using another application to augment the process of putting the MP3 as a ringtone. The most simplest way is by organizing your folders in your SDcard.
This is how i set my folders.
SDcard > Media > Audio > Ringtones
SDcard > Media > Audio > Alarms
SDcard > Media > Audio > Notification
SDcard > Media > Audio > Music
If you set up your folder like above, once you reboot your phone, the OS will automatically set all the mp3 in Ringtones as an option when you go to menu.
All the mp3 in Alarm folder will be selectable when you want to choose a Alarm tone.
And all the mp3 in the notification folder will be able to be used in any app when you try to set a notification tone.
Another tip : If you guys are annoyed that all your mp3 even the one from GPS navigation software comes up in your music playes, or all the pictures come up in the album app, then there is a simple way to remove it.