OK, first the good news - iPhone 4 owners can now jailbreak their handsets.The hack, called JailbreakMe 2.0 (alternative link), runs through the built-in Safari browser on the iPhone (4, 3GS, 3) running iOS4.
OK, what's the bad news? Well, there doesn't seem to be any! When the hack was first released a few hours ago there were problems such as MMS and Facetime not working, but these problems have now been resolved.
To add salt to Apple's wounds, this hack obviously relies on an unpatches Safari mobile vulnerability to be able to work.
Note: This hack does not seem to be compatible with iPads running 3.2.1 update.
Update: Fix for iPads running 3.2.1 should be available shortly.
Update #2: iPhone 3GS jailbroken ... no sweat!