Here is how you can jailbreak iPod Touch 3G or 4G on iOS 5 firmware. The iOS 5 firmware was released few days back and its jailbreak was also live pretty soon after its release (though tethered).

How To Jailbreak iOS 5 On iPod Touch 3G, 4G :
NOTE: This is a tethered jailbreak.
Requirements for the jailbreak :
Update to iOS 5 and follow the steps from 3 to 6 (in step 3, select iOS 5 final IPSW instead of beta 7) given here. After it is done, you must launch Redsn0w and then choose the Just Boot option and follow the on screen instructions to boot into tethered mode to get the jailbreak back once you reboot.
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