The .ipsw format is Apple's format for the distribution of firmware update archives for it's range of pocketable products. These archives are usually obtained automatically using iTunes, however you will be able to download these images directly from the Apple download site. These links are published on third party forums and can be found using google or your favourite search engine, simply searching for "1.1.4 iPhone download url" will usually turn up the direct links for these files.

Once you have found these files, download them and save them to a directory of your choice so that you can find them later.

Once you have downloaded the relevant file click the "Browse .ipsw" button and navigate to the download directory where you placed the .ipsw file and click "open".

You will see that PwnageTool will process the file and give you information in the right hand text window. If this is successful then you will see some text along the lines of :-

2008-03-25 10:02:21 - Loaded .ipsw file from '/Users/devteam/ipsw/iPhone1,1_1.1.4_4A102_Restore.ipsw'.

2008-03-25 10:02:27 - Recognized .ipsw file as version 1.1.4_4A102.