The iPhone Dev Team has just released the second beta of Redsn0w 0.9.7 to convert tethered jailbreak of iOS 4.2.1 to untethered on new-generation iOS devices. The second beta is still for testing only so stay away if you rely on your device or care for an unlock.
posted here to achieve the untethered jailbreak for iOS 4.2.1. In case you got any problems usbmuxd in beta 1, this won't help, it's better to wait for another beta.
Download Redsn0w 0.9.7b3 for Mac OS X
Download iOS 4.2.1 for iPhone, iPad and iPod touch
Download iTunes 10.1.1 for Windows / Mac OS X
UPDATE 1: Redsn0w 0.9.7b3 now available. This version extends the fix made in beta2 over to the non-GUI programs too (like the daemons that handle media content). So now embedded videos in iTunes work. The same link above.