The new jailbreakMe 2.0, aka Star, has been released by The iPhone Dev Team (comex et al.). This userland method tool jailbreaks all iOS devices including the iPod 3G/ 2G [MC model].  This tool uses the safari browser from within your iDevice to perform the jailbreak, so all you have to do is go to the site from your wifi safari browser.

Image Credit: Redmondpie.com

How to jailbreak iPod Touch 3G/ 2G [MC model], using JailbreakMe 2.0:

• Start iTunes and backup everything from Contacts, Calendars, Photos, Videos and Apps.
• Update your iPod Touch 3G/ 2G [MC/non MC]on the latest iOS 4.0.1 firmware with iTunes.
• Once you are done with the update, make sure you are connected to a WiFi network.
• Open Safari on your iPod Touch 3G/ 2G [MC/non MC] and navigate to http://jailbreakme.com.
• “Slide to Jailbreak” to begin the jailbreak process.
• Wait for the required files to download,

• The jailbreak process starts automatically once the files are downloaded. Please be patient and let the process conclude.

• Once done, you will be greeted with the following message.

• Voila! You should now have cydia on your newly jailbroken iDevice.