If you paid your carrier to enable WiFi hot spots on your account, you could just go into Settings under the "Wireless and network" heading and turn on "Hotspot." If you don't want to pay your carrier extra, leave that turned off and follow these instructions.
First, you need to root your phone. Doing so will void your warranty, so make sure you understand the ramifications before you do this. If you brick your phone and your carrier just thumbs their nose at you, it's your fault, not mine. For rooting, I followed these instructions. They're a little scattered, but read carefully and you'll be fine. AndroidCentral.com is a great resource for stuff like this, BTW.
Next, you need to set your phone to allow installation of APK's (app files) from sources other than the Play Store. Go to Settings / Security (under the "Personal" heading) and turn on "Unknown sources." If this makes you nervous, you can turn it back off again after the APK has been installed.
You then need to download the WiFi Tether app that includes TrevE's modifications. You can find more details than you probably want about this mod from TrevE's initial post on the XDA-Developers forum. Scroll down to the big "Download" heading to find links to the actual app. You probably want the "Reload 1" version. In case that post goes away, here's the download link. Once you've downloaded the APK, "run" the APK to install it on your phone. The stock WiFi Tether app from the Play Store will not work for you.
When I first installed the app and ran it, it appeared to run just fine when looking at the phone. However, when I tried to connect to it from either a laptop or a Nexus 7, my Note's access point never even appeared in the list. It turns out that properly configuring the app's settings is the hardest part of this process. There are countless sources on the web that claim they've gotten it to work with different settings. None of them worked for me, so I started playing with settings (based on suggestions in TrevE's post above) until I found a setup that works for me.
Once the app has been installed, run it. Tap the menu button and then Settings. The following options need to be set as specified. Anything not mentioned here can be set to taste.
- Device-Profile: Generic ICS/JB (wlan0)
- Setup-Method: Auto
- Send Netd Max Client Cmd: Yes
- WiFi-driver reload: Yes
- WiFi-driver reload 2: No
- Routing fix: Yes
With those settings made, tap the big icon on the main app screen to turn your hotspot on or off. With it on, I was able to connect using my WiFi-only devices and surf the web successfully through my Note's Sprint 3G connection. This sets up the access point in "infrastructure" mode, which is the standard setup that most homes use, and is the only mode supported by some devices (like our Nexus 7). My previous phone would only setup an "ad-hoc" (aka peer-to-peer) access point, so our Nexus 7 could never use it.
I have no knowledge of whether these settings will work for other carriers like Verizon. I've heard rumors that T-Mobile is very hostile toward back-door hotspots, and has taken steps to prevent them. If you are able to test these settings on a Galaxy Note 2 from carriers other than Sprint, I'd love to hear your results in the comments below.