The iPhone Dev Team has just released Redsn0w 0.9.6b4 today which brings first proper jailbreak, with working Cydia and MobileSubstrate for all iOS 4.2.1 devices.
For those of you who dont know, Redsn0w 0.9.6b4 is based on Geohots Limera1n bootrom exploit which has already pwned all current iOS devices for life. The only problem is that it is a tethered jailbreak, which means you will have to boot it into a jailbroken state on every reboot. This so called tethered or semi-tethered jailbreak condition in Redsn0w 0.9.6b4 however only applies to the new devices like: iPhone 3GS (new bootrom), iPhone 4, iPad, iPod touch 2G (MC Model), iPod touch 3G and the iPod touch 4G. Old devices like iPhone 3GS (old bootrom), iPhone 3G and iPod touch 2G (Non-MC Model) can be jailbroken-untethered right now using this latest version of Redsn0w. So until and unless Comex of Spirit and JailbreakMe fame comes up with another untethered hack for iOS 4.2.1, the jailbreak we get for the newer devices will be tethered (or semi-tethered).
NOTE: Those of you who rely on a carrier unlock MUST STAY AWAY from Redsn0w and iOS 4.2.1.
Follow the step by step instructions posted below to jailbreak iOS 4.2.1 with Redsn0w 0.9.6b4:
Step 1: Download iOS 4.2.1 for your version of iOS device.
Step 2: Update/Restore to iOS 4.2.1 firmware using the IPSW file you just downloaded via iTunes 10.1.
Step 3: Start Redsn0w 0.9.6b4 and point it to iOS 4.2.1 firmware to proceed with the jailbreak.
Step 4: Now select Install Cydia and click Next. Optionally (if available), you can also select any other option you like.
Step 5: Now make sure your device is both OFF and PLUGGED IN to the computer before you click Next.
At this stage you will be presented with a screen where you will have to quickly hold Power button and then while holding the Power button, you will now have to hold Home button too. Now after few seconds release Power button but keep holding Home button until installation begins.
Step 6: Sit back and enjoy while redsn0w will do all the rest for you. Once done, your iPhone or iPod touch will restart automatically and you will find it jailbroken on the latest iOS 4.2.1 firmware.
For iPhone 4, 3GS (New Bootrom), iPod touch 4G / 3G / 2G, iPad ONLY:
Step 7: Now from here onwards, whenever you want to do anything related to jailbreak like SSHing into your device, or running Cydia, you must first run your device in the so called jailbroken state on every reboot by using Just boot tethered right now option in Redsn0w.