Jailbreak iOS 4.2.1 GM on iPhone 4, 3GS, 3G and iPod touch 4G, 3G

Now you can use Redsn0w 0.9.6b2 to jailbreak all these iOS devices.
For now you can install jailbroken-apps via SSH - until we got the new Cydia version - as you have full root access on your iOS device.

STEP 1: Download redsn0w 0.9.6b2,  iOS 4.2.1 GM and iOS 4.1 final version for iPhone 4, 3GS, 3G, iPod touch 4G, 3G (download links at the end).

STEP 2: Update to 4.2.1 GM firmware using the IPSW file you just downloaded via iTunes.

STEP 3: Launch Redsn0w 0.9.6b2,  and Browse for iOS 4.1 firmware final version (NOT iOS 4.2.1 GM). 

STEP 4: Select "Install Cydia" and click on Next

STEP 5: Now make sure your device is both OFF and PLUGGED IN to the computer before you click “Next”.

STEP 6: At this stage you will need to put your iPhone in DFU mode by holding “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 7: You will Get a Jailbroken Device on the latest iOS 4.2.1 GM as soon as the process ends.
source:
http://www.limera1n.cc