The iPod Touch 2G jailbreak was first shown in January. It had to be applied every time the iPod was booted. The iphone-dev team just released the 24kpwn LLB patch to allow for a persistent jailbreak. The team had been hanging on to this patch because there was the possibility the exploit could be used on future iPhone versions. Unfortunately, a group started selling the code, so the team was forced to release it for free. iPod owners are certainly happy though. There is a tutorial available for updating a factory reset iPod (backup link). The team will include the patch in future official tools.
UPDATE: [cptfalcon] pointed out a post that covers the technical details of the exploit.
Now that the iphone-dev team has unlocked the iPhone 3G they’re moving onto jailbreaking the iPod Touch 2G. While they have a fully working jailbreak, it’s not yet in a user friendly format. [MuscleNerd] did a live video demo this afternoon to show what progress they had made. It starts with him showing the iPod on but not booting. He’s already patched the kernel, but it’s failing the signature check in iboot. He then uses the team’s recoverytool to exploit a hole in iboot and patch out the signature check. The ipod then boots normally and he shows non-App Store software like Mobile Terminal, Cydia, and an NES Emulator (which makes use of the iPod’s internal speaker).
The redsn0w jailbreak works, but it has to be applied via tether every time the iPod boots. The team won’t release anything until they’ve found a way around this problem. For more insight into the boot process, check out our coverage of their Hacking the iPhone talk at 25C3.