The iPhone Dev-Team has announced that they have successfully untethered the jailbreak for iOS 4.2.1 for those with their 4.2b3 hashes saved.
MuscleNerd recently tweeted, Got "backup plan" for untethered 4.2.1 JB working (video coming up). Uses mysterious 4.2b3 hashes Cydia kept for you.
(It's a "backup plan" because comex is working on a more extensible one, but this method is also generalizable)
We'll keep you up to date with more information as it develops.
MuscleNerd has confirmed that this will work with AppleTV 2G 4.2.1 too.
Comex has said that we'll get an untethered jailbreak by Christmas.