so a couple of days ago i was trying to set up an adhoc connection on my
laptop to my phone to tether an internet connection when i realized that it
was all wonky.

example:

porta-sendai ~ # iwconfig wlan0 mode Ad-Hoc
Error for wireless request "Set Mode" (8B06) :
    SET failed on device wlan0 ; Device or resource busy.

now i realize that some of you will probably say “you are probably connected
to wifi right now..”…

well, i am not.

so i came up with this work around:

## make sure wifi is down
ifconfig wlan0 down

## this is to add a VAP named ath0 since my wifi is wlan0
iw dev wlan0 interface add ath0 type adhoc

## bring new VAP up
ifconfig ath0 up

## now we connect to the essid of the adhoc machine
iwconfig ath0 essid "xxxx"

## and we get our address
dhcpcd ath0

VOILA!!.
this was a temp fix until i find what is really the issue.
here is some info on my machine:

OS: gentoo 2.6.30-gentoo-r6
i686 Intel(R) Core(TM)2 Duo CPU T7300 @ 2.00GHz GenuineIntel GNU/Linux 
Network controller: Intel Corporation PRO/Wireless 4965 AG or AGN Network Connection (rev 61)