The iPhone Dev Team has released new information regarding iOS 4.2.1 jailbreak and unlock situation, which is as follows:

With Turkey Day a few days off, today Apple publicly released FW version 4.2.1.  As always, ultrasn0w unlockers please stay far far away from this official firmware (and all official firmware).  Wait for the ability to create custom 4.2.1. IPSWs that don’t update your baseband!  If you’re not an unlocker, read on!
The best news of all is for owners of iPhone3G, older iPhone3GS, and non-MC iPod touch 2G.  Due to a combination of our original pwnage2 exploit, the arm7_go exploit, 24kpwn, and limera1n, your device is “just as jailbreakable as ever.”  You reap the full benefit of an untethered 4.2.1 jailbreak.
Next are the owners of all the more recent devices.  The good news there is that due to geohot’s limera1n exploit, all recent devices can be jailbroken (this will be true until Apple released new hardware that fixes geohot’s limerain exploit in the bootrom).  The bad news is that right now, the 4.2.1 jailbreak is *tethered* on all of these recent devices.  A tethered jailbreak means that each time your device loses battery power or needs to be rebooted, you must attach it to a PC or Mac to boot into the jailbroken state.  @comex is working hard on a method that may untether the 4.2.1 jailbreak, but it will require you to have your 4.1 SHSH blobs in order to use it.  No word on how much more effort it will take though (please don’t bug @comex about it!).  (We also have an alternative method that may work, but @comex’s method is much more elegant.)
So when does all this 4.2.1 jailbreak action happen?  Well if you’re a JB developer or tinkerer, you’ve already probably used the redsn0w mentioned in our last post to jailbreak 4.2.1 and at least get SSH working.  But beyond that, there are still some last minute issues with MobileSubstrate and comex’s kernel patches that are being fixed.  We’ll tweet and post a blog update when it’s all available (we hate to give ETAs, but barring any unforeseen problems, probably later today).
In the meantime, please make sure you have your 4.1 SHSH blobs for all your devices.  These will be important even for firmware beyond 4.1 (using both comex’s method and our alternative, depending on how each of them turn out.)
ultrasn0w unlock:  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.
Feel free to ask questions in our comments section below, where we’ve got some awesome new additional moderators — sherif_hashim, dhlizard, and Frank55!

To cut the long story short, since iOS 4.2.1 released today for iPhone, iPod touch and iPad is the same build which was released to developers as GM last week, therefore the updated Redsn0w 0.9.6b3  jailbreak works for all the mentioned iOS devices.

Regarding iOS 4.2.1 unlock, iPhone 3GS and 3G users will be able to unlock their devices sometime this week with a new ultrasn0w update. iPhone 4 unlockers though will have to wait a bit longer before they can use their device on any carrier they like. More updates as they come! Stay tuned !