Source : http://audacityteam.org/wiki/index.php?title=Making_Ringtones

1) Click Project > Import Audio (or File > Import > Audio in Audacity Beta) and import your source file. This can be any MP3, WAV, AIFF, OGG or FLAC file that Audacity can open.

2) Select the portion of audio you want to use for your ringtone (say 15-20 seconds). To do this, click in the audio track and drag a selection area to left or right with your mouse - you can see the length of the selected audio in the timeline above the track. Many phones will loop the ringtone automatically (repeat it over and over), so choose your selection area with that in mind. To hear your selection play looped in Audacity, type L on the keyboard or hold down SHIFT while clicking the green Play button. To stop the playback, hit spacebar or click the yellow Stop button.

3) Click Edit > Trim. This will remove the rest of the file, leaving only the section you selected. If you want to use the whole file, then skip this step.

4) Click File > Export and in the Save as type dropdown in the “Export File” dialogue, choose “MP3 files” and choose a file name to export to in the “File name” box above that.

To Download Audacity http://audacity.sourceforge.net/download/