The Apple dev team has released the updated version of their jailbreaking tool Redsn0w. With the latest Redsn0w 0.9.6B4 you can jailbreak iDevices running iOS 4.2.1 released yesterday. Redsn0w 0.9.6B4 can jailbreak iPhone 3G, iPhone 3GS, iPhone 4, iPod touch 2G, iPod touch 3G, iPod Touch 4G and iPad. Note that Redsn0w 0.9.6b4 is a tethered jailbreak for iPhone 4 and iPod Touch 4G running iOS 4.2.1. For rest all iDevices it is an untethered jailbreak.
If you want to unlock your iDevice then please stay away from this iOS 4.2.1 update as unlock tool is not yet available.
Download Redsn0w 0.9.6b4 for iOS 4.2.1 Jailbreak