A few days back, the iOS 4.2.1 was made public by Apple. And the Dev Team also made a release, the redsn0w 0.9.6 beta 4. Redsn0w 0.9.6 beta 4 could be used to jailbreak iOS 4.2.1 firmware on all devices. But for some devices, it is a tethered jailbreak. But for the iPhone 3G on iOS 4.2.1, it is an untethered jailbreak.
Here are the steps to jailbreak iPhone 3G 4.2.1 iOS using redsn0w 0.9.6 beta 4.
1. Download iOS 4.2.1 for iPhone 3G from here.
2. Update your iPhone 3G to iOS 4.2.1 using iTunes.
3. Download Redsn0w 0.9.6 b4 from here.
Now follow the rest of the steps given here to jailbreak iPhone 3G 4.2.1 iOS.