How to share my iTunes library with iPhone?

The iTunes library on your computer can be shared with an iOS device such as the iPhone. Both the computer and iPhone must be connected to the same Wi-Fi network.

To enable Home Sharing on iTunes 11 and later navigate to:
File -> Home Sharing -> Turn On Home Sharing

To enable Home Sharing on iTunes 10.2 to 10.7 use:
Advanced -> Turn On Home Sharing