I'll get to the mechanics in a second. The big question is why you'd want to jailbreak it in the first place. My one-word answer: tethering.
Jailbreaking is akin to opening a small door in the iPhone OS to allow apps unapproved by Apple to run. Until now, you had to jump through several hoops to perform a jailbreak, but the new JailbreakMe.com site makes it quick and painless.
Before iOS 4 came along, bringing with it long-awaited features like multitasking and folders, there was a lot more incentive to jailbreak. Now, it's less necessary, but still worthwhile for tethering -- using your iPhone as a 3G modem for your laptop (and/or other devices).
As you may know, Apple and AT&T finally started offering tethering this summer -- but for the insane rate of $45 per month. Or, you can jailbreak your iPhone, buy a tethering app for $10-20, and enjoy no-fee tethering. Kind of a no-brainer, huh?
While you're at it, check out the equally awesome Wi-Fi Sync, which lets you sync your iPhone without wires.
Two bits of bad news. First, JailbreakMe.com continues to be slammed with traffic; I've been unable to get the necessary jailbreak download for over a day.
Second, there's always the risk, however slight, that jailbreaking will "brick" your iPhone. This is definitely a proceed-at-your-own-risk hack. (It's also worth noting that JailbreakMe actually exploits an iPhone security flaw, something you should read about before continuing.)
If you decide to give it a whirl, the How-To Geek has excellent step-by-step iPhone jailbreak instructions.