Most iPhone and iPod Touch users are often faced with the gut-wrenching dilemma; to jailbreak or not to jailbreak? If you are also contemplating jailbreaking but still afraid to take the plunge then maybe you should first check out all the reasons to jailbreak. If you still need further convincing then going through our jailbreak and unlock categories at http://www.ismashphone.com/iphone and http://www.ismashphone.com/unlock-iphone/ respectively seems like a good idea.
Those who have decided to jailbreak can either try the blacksn0w way or use the more popular Pwnage tool method (recommended). Keep in mind guides above cover iphone unlocking as well as jailbreaking.
In case you change your mind or something goes terribly wrong don't panic as you can recover your iPhone or iPod Touch by just following this guide.
You may also need links to iPhone OS downloads and other iPhone jailbreak related files which you can read about here.
For iPod Touch owners read this (taken from Dev Team blog):
iPod Touch 1G (Original iPod Touch)
Use PwnageTool to create a firmware image and restore with that .ipsw using iTunes.
iPod Touch 2G
Use PwnageTool to create a firmware image and restore with that .ipsw using iTunes, this will only work if you are already Pwned at 3.0 or 3.1. If you are at 3.1, downgrade to 3.0 and use redsn0w to Pwn 3.0 then you have an upgrade path using PwnageTool.
iPod Touch 3G
At this time PwnageTool does not support this device.
Note: Most likely if you got iPod Touch as a present for Christmas it is 3G version therefore you cannot jailbreak it.