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.
Seas0nPass is a new jailbreak utility designed specifically for the second generation Apple TV (2010). It's comparable to utilities like PwnageTool. I've used both and I personally find Seas0nPass to make the process much simpler when it comes to the Apple TV. Not only does it jailbreak 4.1.1 (4.2.1), it offers a pretty easy tethered boot mode as well. Hit the jump for a walkthrough on how to jailbreak the Apple TV 2 using Seas0nPass.