Are you still running iOS 3.x.x on your iPhone? If so, you should go ahead and update to iOS 4.01. The reason I suggest this is that Apple has patched the security flaw that made the latest jailbreak possible, and you’ll soon be unable to grab 4.01.
Not sure how to update? Simply fire up iTunes. Assuming that it’s set up to auto-update, you should see a message asking if you’d like to update your iPhone. If not, simply click on your iPhone in the left sidebar and then click the “Check for Update” button.
Once you’ve updated, do a quick backup and then surf on over to jailbreakme.com using Safari on your iPhone and simply swipe the slider to jailbreak. It’s so easy a kid could do it. Literally. In fact, I let my son jailbreak my iPhone for me.
Oh, and after jailbreaking, you should deactivate auto-updates so you don’t inadvertently update to the newer, non-jailbreak-able version of iOS when it’s release.