messaging and wi-fi iPhone

All major mobile-phone carriers have e-mail addresses that feed into your SMS inbox. You can use your phone’s e-mail client to send as many texts as you want. In order to determine what address to send your message to, you first need to know what cellular provider your friends have. If somebody replies to a text message that you sent as an e-mail, his/her reply will come to you in the format you initially sent it in.
Sprint phonenumber@messaging.sprintpcs.com
Verizon phonenumber@vtext.com
T-Mobile phonenumber@tmomail.net
AT&T phonenumber@txt.att.net
This you can do over wifi.
And the neat thing about this is it wont count against your text plan.
MacBook Pro

Messaging is done via the carriers cellular network only - messages are exchange via the same network as calls.
CDMA networks are better overall inside buildings than GSM networks, but not always. I formally had an office in a metal building and I had a Verizon phone and my iPhone at the time. I had to step outside to ensure a call wasnt dropped with my Verizon phone but not with my iPhone and AT&T.
I contacted Verizon customer/technical support and was told that Verizon cannot ensure reception or call quality when inside any building. The same applies to AT&T and with every carrier. This depends on the network - CDMA or GSM, and the building structure/make-up.
 MacBook Pro 15" Intel Core 2 Duo/2.53GHz/4GB RAM/500GB HD Mac OS X (10.6.3)  iPod w/Video 30GB,  iPhone 3G 16GB

Just to add as others have already said SMS works over Cell signal only.
Yes you can email to an SMS as mentioned. Note any replies will come to your email (thus not as instantaneous).
The reason it uses cell only is when SMS was introduced it was the carriers using extra space in the data packets it sends for tower communication. Depending on how a carrier implemented the protocol this extra space varied but in general most had 160 chars of free space not being used in tower communication (your cell checking in, etc). So that is why SMS messages are limited to ~160 (some carriers offer more or less).
Because SMS works within the protocol your phone is using to check in with towers is why it only works over a cell signal.
It is also this reason carriers have been sued about charging for SMS since these data packets are already being sent across their network and not something new they added causing more usage. Of course the lawsuits went in their favor.
You can also try to get a Google Voice account and they will do SMS for you. Their web interface on the iPhone is nice.
Message was edited by: DaVBMan
Windows XP Pro iPhone (1st Gen) AppleTV

Thanks everyone. I figured as much, but, was hoping against hope.
Next is to find an affordable signal booster. Ive tried the trick of plugging my iPhone into the computer, and although I get an apparent signal boost (0/1 bar to 3 bars) Ive noticed that once I begin to use the iPhone, the signal craps out.
Ive found other signal boosters for about $50 and the consumer comments seem to suggest itll work ... maybe Ill try it