How do I jailbreak my iPhone 4?
Open up Safari on your iPhone 4 and go to jailbreakme.com.
Sit tight for couple minutes and your iPhone is jailbroken. You'll see that Cydia app is installed.

It uses PDF security flaw on mobile Safari. It will be patched soon, so jailbreak now while it's available. It's by far the easiest way to jailbreak your iPhone.

It jailbreaks iOS 4.0.1 which is the latest at the moment.

Edit (8/11/2010): Apple has just releases iOS 4.0.2 to fix the PDF exploit that jailbreakme.com uses. Jailbreakme.com should still work for iOS 4.0.1 and below.

Edit (8/13/2010): PDF Patch is available for download in Cydia. Search for "PDF Patch." You can jailbreak 4.0.1 and then just patch PDF bug instead of upgrading to 4.0.2 and wait for jailbreak to be available.