How To: Jailbreak iOS 4 on an iPhone 3G, 3GS or iPod Touch

In this tutorial, learn how to jailbreak your new iOS 4 on your iPhone or iPod. This jailbreak will let you take advantage of cool new features including the huge app superstore: Cydia. Enjoy!
Step 1: Download and install the latest version of iTunes.

Step 2: Now start iTunes and sync your iPhone with your PC so that it backs-up all your important data including settings, apps, music, contacts and photos.

Step 3: Download Sn0wbreeze and the original iOS 4 firmware file for your version of iPhone or iPod touch here. Move all these files to your desktop.

Step 4: Start Sn0wbreeze and select "Simple Mode".

Step 5: Sn0wbreeze will now ask you to browse for your .ipsw file. Select the correct iOS 4 firmware .ipsw file by clicking the "Browse" button. Sn0wbreeze will verify the selected file and then will present you with following screen.

Step 6: Click on "Yes" when Sn0wbreeze asks you "Do you want to activate your iPhone?" for hacktivation. Click on "No" only if you are on an officially supported carrier like AT&T.

Step 7: Sn0wbreeze will now create the custom .ipsw file for your iPhone which will be jailbroken.

Step 8: Restore your iDevice with this custom build firmware as show in this video

How to: Unlock iPhone on iOS 4.0 (Any Baseband):
• Start "Cydia" on your iPhone.
• Touch on "Manage" tab on the bottom.
• Now touch on "Sources" as seen in the screenshot below:
Cydia will now automatically update your sources by following a series of automated steps.
Once you are done with the unlocking and jailbreak process. You can now restore all your settings, apps, music, contacts and photos to the newly installed firmware version 4.0 by restoring the backup that you made in Step 2 from iTunes.