There is a pretty simple way to customize your iPhone ringtones. Go to the iTunes and customize your iPhone ringtones for free.  However, there is a small glitch – you can create ringtones only with MP3, ACC, and AIFF files and only with the DRM (Digital Rights Management) free songs. That does close down the scope a bit, but till, it’s a very good deal to choose from.  So use either songs from your own library or from DRM free sources like Amazon.com

How to do this? Go to iTunes and select a song. Then right click on it to go to “Get Info”. From there, go to “Options”, select “Start Time” and “End Time” boxes and thus specify that part of the song which you would like to use as your iPhone ringtone.
After that go to the “Advanced” in the menu bar and select either “Create AAC Version” or “Create Apple Lossless Version.” Thus a duplicate song with a shorter time is copied on the iTunes. Drag the duplicate song to the desktop and uncheck the “Start Time” and “End Time” boxes at iTunes and also delete the duplicate copy at the iTunes.

Now the important part. Rename the file with the “.m4r” extension to turn it into a ringtone file. Remember, it won’t work with the existing “.m4a” extension.

Now drag it to the “Library” column and release it when “Library” becomes highlighted.

What are you waiting for? Sync your iPhone now and get jazzy with your customized ringtone.

For a video demonstration of this entire process, check the CNET video here.