Rooting is to Android like Jailbreaking to iPhone. Out of the box, the phone is on a guest account. Rooting pretty much gives you superuser (or administrator) access to your phone.
From Cyanogen's website:
Obtaining root ("administrator", or "full") access to your phone. This means you can mount its internal memory partition as read/write, which lets you do various things: have Wi-Fi tethering (on
Well the worst that could possibly happen would be you ending up with an expensive paperweight but the odds of that isn't high (it just is possible and there have been a couple of cases of bricked phones).
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