If you want to use your iPhone 4S Internet connection with your iPad 3, Bluetooth is the way to go.
The TetherMe description in the Cydia Store implies that another app, iTether, is required for an iPhone-to-iPad tether over Bluetooth. It also explicitly states that Bluetooth does not work with an iPad 2. There is no mention of iPad 3 compatibility or requirements, so we’re left to wonder.
My tests revealed that a jailbroken iPhone 4S running TetherMe can pair with a non-jailbroken iPad 3 over Bluetooth without any extra software.
WiFi positioning was a near total failure when tethered over WiFi, but it would, infrequently, get a location fix. When tethered over bluetooth instead, WPS worked much, much better, and the phone cooled down significantly. It was running fairly hot while serving as a WiFi… hotspot.
TetherMe also provided a noticeably faster connection, whether WiFi or Bluetooth, than the WiFi-only PDAnet.