Redsn0w 0.9.6b2:Jailbreak iOS 4.2.1 iPhone 4,3GS,3G/iPod touch 4G,3G,2G

To jailbreak your iPhone and iPod touch on iOS 4.2.1 GM with Redsn0w 0.9.6b2 then follow the step-by-step guide posted below:

NOTE: If you rely on a carrier unlock then stay away from from iOS 4.2.1 firmware.

Download both iOS 4.2.1 GM and iOS 4.1 Final for your iPhone / iPod touch from the download link given below.
Update to the iOS 4.2.1 GM firmware using the IPSW file you have just downloaded via iTunes 10.1.
Download Redsn0w 0.9.6b2 (download link given below), and run it.
Now after running it, point it to the iOS 4.1 Final IPSW file to proceed.
Select Install Cydia (optionally, if available, you can also select other options if you want) and then click Next.
Now first, plug your device into the computer, switch off your device and then click Next (Do make sure that your device is both powered off and plugged in to the computer before clicking on Next).
Now you’ve to connect your device in recovery mode, to do this, first you’ve to hold Power button and then also hold Home button. After few seconds release Power button but keep holding Home button until the installation is started.
Now rest of the tasks are automated. Once all the tasks are completed, your iPhone/iPod touch will reboot automatically.
Now you should have a fully jailbroken iPhone or iPod touch on the latest iOS 4.2.1 GM firmware.