The Chronic Dev Team finally released Greenpois0n RC5 tonight which will jailbreak iOS 4.2.1 fully untethered. The only other jailbreak for 4.2.1 was previously limited to a beta version of Redsn0w, which had a few issues and wasn't highly recommended for every-day users.
Many iPhone users (including myself) have been waiting a long time for this day to come. We haven't been able to test it out yet, but so far there haven't been any reports of issues or problems with the jailbreak. Right now only a Mac version is available but we're expecting a Windows and Linux version to be available soon. We're assuming this covers the iPhone 3G, 3GS and iPhone 4 as well as the iPad and iPod Touch, but we haven't confirmed that yet.
Let us know if you're able to try it out and report back any issues you find in the comments below!