With the release of iOS 4.2, Apple allows owners of iPhone 4, iPod Touch 4th gen, and iPad to use the Find My ‘iPhone’ feature of MobileMe for free. It does not work out-of-the-box however. You will have to set up tracking on each of your devices.
You start by creating a MobileMe account through the Mail, Contacts, Calendar section under Settings. If you do not own a MobileMe account, you will be able to register with your Apple ID account. After an email verification process, you will be able to activate Find My iPhone through the settings of the just created MobileMe account. It might take a while for the settings section to register the verification, close settings and try again after a while.
Turns out the Apple website has some more screenshots as well.