jamms is incorrect. That’s the old, hard way to do it. With the new version of iTunes (7.4.1) all you have to is drag the the AAC file to the desktop (or wherever), and rename the file extension to ”.m4r”, then double click the file and it will be added to iTunes. It will now show up in your ringtones.
Sync it with your iPhone and you’re done. Booyah.
Note: make sure the file is less than 30 seconds long.