Is is possible to use a mobile phone as a usb modem?

Is it possible to use the data allowance of a phone contract on a laptop? At the moment, I have a usb dongle which I use when I need to use my laptop away from home. Instead of using this dongle, can I make my phone act as a dongle?

You can if your phone and your telco allow it.

I certainly do this with my Android phone on a pre-pay (PAYG) mobile phone account with O2. I use a USB cable (same one for charging, syncing data to PC) but you can also usually use a bluetooth wireless connection between phone and computer.

It is called "tethering"

See also mobile broadband vs tethering, any benefits to dongles e.t.c

Note that many phone companies dislike tethering as they believe netbooks/tablets/desktops use more data bandwidth than mobile phones. Phones bundled with monthly contracts may have restrictions on tethering.

If you have driver+tool that allows you to access your phone's functionality you can use it . If you are on a linux machine all you need is Blueman .
And as Red mentioned if your carrier allows it , you can do it.Most of them do anyway (I am yet to encounter someone whose carrier doesn't allow it)