I know a few people who have had Hotmail address for a long time and don't want to change. They also have bought iPhones and now have no way to use the built-in client on the iPhone to read mail. This solutions lets them read Hotmail on their iPhone. (Actually, the same setup can apply for Apple Mail, too.) One catch here is that your Hotmail account must support Forwarding. You can see it is does under the Hotmail Options.
Basically these instructions help you set up forwarding in Hotmail so that incoming messages are forwarded from Hotmail to a Gmail account. This also sets up Gmail and the iPhone to make replies and new messages look like they come from Hotmail. When complete, you can read, reply, and send messages in Gmail and the iPhone as if you were on Hotmail.
With this solution in place:
In addition to these steps, you may need to do work to bring your Hotmail address book to Gmail. Gmail has some instructions to help with that.
Start with Gmail. Create a new Gmail account. Note that you could use an existing Gmail account for this solution. This has some tradeoffs, one being that messages you send from the iPhone appear to come from that Gmail account instead of your existing Hotmail account. If you just want to keep your Hotmail account intact and use that as your main account, I think it's better for to create a new Gmail account and just use that for handling Hotmail.
Under Settings, go to Forwarding and POP/IMAP » Enable IMAP. Save the changes. Under Settings and then Accounts, add another email address -- add your existing Hotmail account.
Now go to Hotmail. In your inbox, there should be a message from Gmail; you need to click on a link in that message. Next go to Options and set up forwarding to your new Gmail account. It's up to you whether messages are retained in Hotmail. (If you don't have an option for forwarding, you may be out of luck. Perhaps others have advice on how to get Hotmail to allow this.)
Back to Gmail: There should be a message from Hotmail; you need to click on a link in that message. Now back into Gmail settings, under Accounts, you should see your Hotmail email address listed. Click on the link that says Make Default. From here on, you can use Gmail as your way to check Hotmail. You actually do not need to login to Hotmail any more to read mail, you can use your Gmail account as the web-based way to check Hotmail.
Now how to access from iPhone: On the iPhone, go to Settings and then Mail. Delete any previous attempts you've made to make a Hotmail account -- these can cause problems with the new account you create. Create a new email account by clicking Add Account. On the next screen, choose Other (don't pick Gmail). Here are the settings:
Mac OS X Hints
http://hints.macworld.com/article.php?story=20071218184905987