The code and instructions in this gist are from http://peterdowns.com/posts/open-iterm-finder-service.html. I've had to do this a few times and wanted to distill it the basics.
- Open
Automator
- Create an
Application
- Choose
Actions > Utilities > Run Applescript
- Paste the contents of
open_in_iterm.app
into the window. - Save the script somewhere convenient
- Find the script, then drag the script onto the Finder window while holding the command key (or in Yosemite, the command + option keys)