MuscleNerd of the iPhone Dev Team has confirmed that he has got untethered jailbreak working on the latest iOS 4.2.1 firmware. He further explains that this a “backup” plan to Comex’s upcoming userland method and that it is generalizable.

Got "backup plan" for untethered 4.2.1 JB working (video coming up). Uses mysterious 4.2b3 hashes Cydia kept for you
(It’s a "backup plan" because comex is working on a more extensible one, but this method is also generalizable)
ipt4g 4.2.1 untethered JB w/4.2b3 kernel: … Wastes no exploits, but upcoming @comex JB maybe better
This method also uses iOS 4.2b3 (Beta 3) SHSH blobs which Cydia was saving for all iOS devices last month. Oh an all iOS devices will be supported.

You can see it in action in the video embedded below:

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