This is from the New England Historical Genealogical Society weekly newsletter, 23 Feb 2011:
Research Recommendations: The Thorn
by Michael J. Leclerc
One of the most abused of all letters (and former letters) in the English language is the Thorn. In Latin, the letter was written as Þ (capital) or þ (lowercase). In English, however, the thorn looks like the modern letter “y.” The thorn is no longer used in everyday English. The Thorn was pronounced the same way as the digraph “th” in modern English. In proper usage it is NEVER pronounced as the letter “y.”
One of the most common uses was “ye,” pronounced as “the.” One can often see signs around America that use the modifier “Ye Olde,” which the average person pronounces it as “yee.” As the Oxford English Dictionary states, it was never pronounced in such a fashion.
Now you know the proper pronunciation, and can use it to show off one of the many benefits of being a genealogical researcher to your less-enlightened friends.