When it came time recently to jailbreak an iPod touch, I decided to take a look at George Hotz's BlackRa1n tethered solution. Unlike the Pwnage approach that creates a custom ipsw (iPhone software) bundle that you install via iTunes, the tethered approach communicates directly with your iPod or iPhone via the USB connector cable you use for normal syncing. That makes the tethered solution a very fast and easy-to-use approach, especially for units shipped with the 3.1.2 software installed.
Download the BlackRa1n tool for both Windows and Mac from the GeoHot site. Complete instructions are available at his Weblog. If you own more than one iPhone unit, make sure you unplug all but one from the system before you start the jailbreak. Launch BlackRa1n and click the "make it ra1n" button. Then be patient and wait as the software does its job, including replacing your recovery logo (normally a picture of the iTunes logo and the connector cable) with a vanity image of the software's author.
Be aware that the blackra1n jailbreak may present issues during reboot, forcing you into recovery mode and requiring BlackRa1n to launch properly. Hotz writes, "If your ipt2/3GS/ipt3 is rebooting into recovery after running blackra1n, this isn't a bug. It's a feature. You need to run blackra1n every time to boot it. This 'feature', called tethered jailbreak, is enabled by upgrades Apple made to the bootrom and the fact ipt3 uses nand flash." I did not experience this behavior on my iPod touch 2nd generation unit. It reboots without problem, and, no, it had not been jailbroken before.
Once the jailbreak has finished and your iPhone has rebooted, you can run the on-device version of the BlackRa1n software to install Cydia, the Rock store, and (for iPhones) the sn0w unlock that allows phones to be used with other carriers.
I found the whole process extremely easy to perform and would recommend it to anyone who had difficulties using Pwnage. The trade off, of course, is an easier install versus possible long-term reboot issues. It seems that my touch ducked the bullet on that one but that's only one experience among many.
Although BlackRa1n is free software, the author asks for donations to support this effort, so he can continue providing tools in the future. A donate link appears on his home page.