The iOS 4.3 website has confirmed that the WiFi mobile hotspot feature can only be used with up to three devices at once on both Verizon and AT&T. The Verizon MiFi and similar hotspot solutions, including those baked into Android phones, offer support for up to five devices, so it’s curious that Apple (possibly pressured by the carriers) has capped it.
If you’re planning to primarily use the hotspot feature for personal tethering, there isn’t much reason to be bothered by the limit—plus, five devices tethered to a single 3G connection at once would likely choke the bandwidth.
You can share your connection with up to five devices at once over Wi-Fi, Bluetooth, and USB — with up to three of those connections using Wi-Fi.4
4. Personal Hotspot requires a supporting hotspot tethering plan from your carrier and works with up to three devices over Wi-Fi, three devices over Bluetooth, and one device over USB.