iSCSI (Internet Small Computer System Interface) is a low level network protocol which allows a client machine (known as the Initiator) to control storage on a server (known as the Target). With iSCSI the control is low level. So low level in fact, that the disk needs to be partitioned and formatted by the Initiator.
FreeNAS 8 can act as an iSCSI Target and can allow a remote Initiator to control a whole hard disk or present a file (created on the existing storage) as if it was a hard disk. For this tutorial I will assume you have a FreeNAS system installed with at least one volume configured. For more information on installing FreeNAS and setting up volumes see my previous tutorial here: Build a Simple NAS Setup with FreeNAS 8.
Read full tutorial: http://www.trainsignal.com/blog/freenas-8-iscsi-target-windows-7