I read about the following procedure to create your own ringtone from any song in the iTunes library:

1. Open iTunes and select your favorite tune to create the ringtone. Possibly first make a working copy of the song
2. Select CMD+i or CTLR+i, goto Options tab and setup the start time and end time. I think you have to stay within 30 seconds or so
3. Right-click and select "Convert To AAC", a ACC version of the selection will be created
4. Drag the MP4 version to your desktop and change the extension to M4R (ringtone). You need to confirm your choice
5. Add the M4R version to your iTunes e.g. Drag & Drop or double-click the file. The ringtone should appear in the Ringtones collection
6. Now SYNC with the iPhone to upload the ringtone

Tags: Ringtones, iPhone, iTunes