Steps:
Step 1: Download iOS 4.1 for your version of iPhone 3G / iPod Touch 2G (download links at the end).
Step 2: Update to this latest firmware using the IPSW file you just downloaded via iTunes 10.
Step 3: Launch Redsn0w 0.9.6b1 (download links at the end) and Browse for iOS 4.1 Firmware.
Step 4: Select "Install Cydia" and click on Next
Step 1: Download iOS 4.1 for your version of iPhone 3G / iPod Touch 2G (download links at the end).
Step 2: Update to this latest firmware using the IPSW file you just downloaded via iTunes 10.
Step 3: Launch Redsn0w 0.9.6b1 (download links at the end) and Browse for iOS 4.1 Firmware.
Step 4: Select "Install Cydia" and click on Next
Step 5: Now make sure your device is both OFF and PLUGGED IN to the computer before you click “Next”.
Step 7: You will Get a Jailbroken Device as soon as the process ends.Note: If you have an unlocked iPhone 3G with ultrasn0w, you have to stay away from Redsn0w, as it updates your baseband to latest version, which is still unlockable till now.
Download Redsn0w 0.9.6b1 for Windows [Mirror]
Download iOS 4.1 for iPhone 3G and iPod touch 2G.