How do SIM cutters work? Here are some photos courtesy of @honcheng.
A normal SIM card, awaiting its fate.
Carefully positioned in the stapler-like device.
Voila! Smaller, shorter and cut.
Signing up for a multi-SIM plan is one way to use the same data package on your iPad and your upcoming iPhone 4. This saves you from having to get a separate data package for your iPad.
Obviously, the carriers do not recommend cutting your SIM card. Note that if you don't cut it properly, it won't work and you'll have to buy a replacement SIM card.