Currently the only way to get ringtones(legally) is to download certain songs off of iTunes(pay the $1), and then for another $1, you can cut the song to however you want it to be for your ringtone.
Then of course, there are other ways, but I won't go into those(and I don't recomend those ways either way).
EDIT: There might be other legal ways. I was just reading an article from another thread talking about the new update and it created a new ringtone folder for "custom" ringtones, not sure on exactly what the details are, if someone more informed could post, that'd be great.