In my previous post I posted a few screenshots of my new Nexus 7 which I bought recently. In this post I am going to write about how you can unlock the bootloader of your Nexus 7. This process can be basically done in 5 steps.
Rooting the N7:
You can live your life with N7 without rooting it. But as one of the Android Commandments say: “Thou shalt not use thine nexus unrooted” I think you need to be awesome instead and do unlock it to get these features to work:
1. Ability to use an OTG cable to connect pen drives to the device, thereby overcoming the 16 GB (13 GB available actually) limitation.
2. Using a 3G dongle to let your device take advantage of 3G (which by default this device don’t have)
3. Take advantage of apps that only works when device is rooted, like Titanium Backup and Cache Cleaner
4. Flash custom ROM’s and/or Install Ubuntu Touch on your device (and be a part of an OS in the making!)
You can read this article that echoes my thoughts, until the part where he used a toolkit to root (I rooted the old fashioned adb way).
Here’s How to Root the Nexus 7 – But Should You? | Android.AppStorm
Anyway, so how actually you root N7?
You can use the most popular Nexus Rootkit to do all kinds of stuff to your N7 including Rooting, flashing zips etc, but if you are geek like me, here is how to do it manually (and its way easier than you think):

1. First enable “USB debugging” on N7:
Goto settings -> About Tablet, and tap Built Number several times, until a message pops up below with the Google sense of humor: “Congratulations, You are not a developer.” You have just enabled a menu option, “Developer Options” in settings. tap Developer Options, and then check mark “USB Debugging”.
2. Disable MTP:
Now open Settings -> Storage. And find the option to go into “USB computer connection”, and uncheck “Media Device (MTP)”. This is necessary so that adb discovers the device (explained later).
PS: As I came to know later, for some MTP needs to be enabled. If you are not able to successful your device to PC then you can try again enabling MTP.
3. Get Android Debug Bridge utility (ADB):
There are several methods to get ADB.
-> You can download it from here: Android SDK | Android Developers. Its a big download.
-> Or you can download the Nexus Toolkit from here: Nexus Root Toolkit v1.7.2 | WugFresh (file: NRT_v1.7.2.sfx.exe) and use the adb which the toolkit uses. (its a smaller download than downloading complete SDK).
-> Or you can simply get the SDK from the Omega DVD of Jan 2013 (its rare times like these that a digit DVD really helps!)
4. Install the Nexus 7 drivers on your PC:
I tried to install the drivers from the toolkit, and had a hard time doing that. The toolkit just wasn’t able to help me install the right drivers, and I tried installing the alternate driver from the choices. It wasn’t after a long R&D and many reboots of the N7, that a dialog box prompt on the device (shown in below screenshot). Once I allowed it, rest was easy.

5. Use ADB to Unlock Bootloader: (FINALLY)
Open command prompt with platform-tools as directory on prompt. And type the following commands to test if ADB is able to communicate with your device.
F:\Android\adt-bundle-windows\sdk\platform-tools>adb devices
Above command should result something like this:
F:\Android\adt-bundle-windows\sdk\platform-tools>adb devices
List of devices attached
015d8b3b4558260b        device
If you can’t see above output, then you have to try installing the drivers again. Which you can do so from SDK Manager. Try selecting Google drivers from there. Once you *can* see it as a device, you would need to enter these commands from adb.
Following command will reboot your N7 to bootloader.
F:\Android\adt-bundle-windows\sdk\platform-tools>adb reboot bootloader

Following command will actually unlock the bootloader. You will encounter a confirmation message on the device before its committed.
F:\Android\adt-bundle-windows\sdk\platform-tools>fastboot oem unlock
...
(bootloader) erasing userdata...
(bootloader) erasing userdata done
(bootloader) erasing cache...
(bootloader) erasing cache done
(bootloader) unlocking...
(bootloader) Bootloader is unlocked now.
OKAY [104.112s]
finished. total time: 104.112s

After you unlocking the bootloader you will also need to install Super SU app, so that your device is rooted and the apps can actually use the root status. Which you can install from the Play market.
Now you have your device rooted, and all the data from it should be erased and Nexus 7 set to factory setting. You can now use apps to use Pen drives and 3G dongles on it. But if you want to dual boot N7 with Ubuntu Touch, then continue further.
Read in my third post about how to install Ubuntu Touch on your rooted Nexus 7.
PS: Thanks to Aaruni for pointing out the mistakes. You can read a more recent article about unlocking bootloader and rooting of Nexus 7  along with commands on Linux here.