The Dev-Team Blog was just updated with a new redsn0w version 0.9.6b4 jailbreak (based on Geohot's Limera1n bootrom exploit) for iOS 4.2.1. Unfortunately, iOS device owners won't find jailbreaking as easy as navigating to a website. And the 4.2.1 jailbreak is currently "tethered" so owners of the iPhone 4, iPad, and newer iPhone 3GS and iPod touch models will have to reattach to a PC or Mac to boot into a jailbroken state each time your device loses power or needs a reboot. Those of you who rely on the ultrasn0w unlock should hold off for now -- good advice for anyone not comfortable with terms like "SHSH blobs" or "Cydia." Everyone else can hit up the link below with a detailed how-to provided by Redmond Pie.
According to the following news link on engadget..
iOS 4.2.1 Jailbreak hits with updated redsn0w -- Engadget
And of course the link to the devs website: