Precaution: Backup your iPhone! This should always be the first step when hacking into anything. In case you need a guide on how to do this, Apple has the instructions for creating and restoring a backup of your iPhone.
Install blackra1n:
Step 1. Download the blackra1n.exe file from http://blackra1n.com/.
Step 2. Run the blackra1n.exe file from your PC.
Step 3. Click on make it ra1n.

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Step 4. Your iPhone will go into recovery mode, and then reboot on its own (the screen will display a picture of GeoHot as the phone boots up).

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Step 5. From your iPhone, run the blackra1n app.
Step 6. Choose an installer (I chose Cydia).
Note: Do not install Cydia and Icy at the same time!
Step 7. Once you’ve installed an installer, it’s safe to uninstall blackra1n.

Much mahalo and aloha to GeoHot for blackra1n.
DISCLAIMER: I do not advocate the jailbreaking of iPhone for the purpose of pirating, tethering, cracking, or other malevolent deeds.