The Dev Team has prepared a new version of the redsn0w jailbreaking tool for both OS X and Windows PCs, which is now available to those wishing to jailbreak their iOS 4.2.1 device. (A new version of Pwnage for OS X is also available.) The Dev Team also has finalized a new version of ultrasn0w, though it hasn't been distributed yet. Ultrasn0w unlocks the iPhone.
These tools only work with the iPhone 3G and iPhone 3GS, however. The iPhone 4 isn't supported yet, though the Dev Team says a version for iPhone 4 is still in works.
On its blog, the Dev Team said, "After redsn0w is officially released with the new Cydia and kernel patches, we’ll be able to assess the unlock situation. It’s already looking very promising though, so expect the unlock for the 3G and 3GS to be coming this week. The i4 unlock is taking more effort though, and no further concrete info is available about that yet."
Jailbreaking an iPhone makes it so applications that aren't approved by Apple can be downloaded and installed on the iPhone, typically from Cydia. Unlocking an iPhone means breaking the digital chains that lock the iPhone to AT&T's network (in the U.S.). Unlocked iPhones (3G and 3GS) can be used on networks other than AT&T's.
The iPhone 4, however, uses a micro-SIM card and not a standard SIM card. If and when an unlock becomes available for the iPhone 4, users will have to customize a non-AT&T SIM card to fit the smaller space.
iPhone users should note that jailbreaking can result in "bricked" phones, and voids Apple's warranty.