I have been trying to figure out how to do this and finally did it here's how:
Step 1: Go on cydia on your iphone/ipod touch and search for "veency" and install that

Step 2: Download RealVnc from this site

Step 3: Install realvnc and open up "run vnc viewer"

Step 4: a little rectangular window should open up asking for server:
Make sure you are connected to wifi and go to your iphone/ipod
go to settings -->wi-fi-->click the blue arrow next to your network and it should show your ip address

Step 5: Put your ip address in the place where it asks for "server:"

Step 6: press okay, you should get a message on your iphone/ipod asking you to "accept"
press accept and your ipod/iphone should be on the screen.

[the above information is from: http://shabzcotutorials.blogspot.com...touch-on.html]

Right Click is touch, Left Click is home, Center Click is power(top button).

For tethering the iPhone ip is