Don't know how to check your firmware? See instructions below.

Firmware 1.1.1 (for people who did NOT UNLOCK their phones) :
The new (and complicated) Jailbreak from the Dev Team can be found here:
http://conceitedsoftware.com/iphone/1.1.1-jailbreak.zip or http://iphone.xorl.net/1.1.1-jailbreak.zip

DO NOT USE WITH ANYSIM OR ANYTHING THAT MODS YOUR BASEBAND.
IT IS SAFE TO USE WITH IPSF ONLY

Firmware 1.1.1 (for people who unlocked with anySim or iUnlock) :
You can "Jailbreak" by "Downgrading the OS", but you cannot "Carrier Unlock" it.
It is possible to "Downgrade" the OS of the phone, from 1.1.1 to 1.0.2, which allows you to jailbreak and install 3rd party apps that were written for 1.0.2.
If you previously "bricked" your phone by installing the 1.1.1 update onto an unlocked phone, you can downgrade the OS, and have a nice iTouch Plus (but it will not function as a phone, with a few exceptions).

Firmware 1.0.2 :
If you have this firmware and wish to jailbreak or unlock your phone, DO NOT UPDATE TO 1.1.1.
If you have already installed 3rd party apps, but not unlocked your phone, UPDATING TO 1.1.1 WILL DELETE ALL 3rd PARTY APPS, and make it impossible to unlock your phone.
If your phone is already unlocked, UPDATING TO 1.1.1 WILL "BRICK" YOUR PHONE, because the unlocking process usually changes the firmware's baseband, and the update causes your phone's IMEI to become invalid.

Note: Once you have carrier-unlocked the phone, you cannot "re-virginize" it to factory state. Do not believe anyone who tells you this is possible, or you will risk bricking your phone.

Firmware check on Un-Activated Phones:
"You can check whether or not an unactivated iPhone is running the old firmware version by entering field test mode. Do this by invoking an emergency call, and dialing *3001#12345#* then pressing “Call”. Tap “Versions,” and you will see the firmware revision."

Firmware check on Activated Phones:
Tap on the Settings icon in your phone, tap on General, tap on About, scroll to the bottom where it says Modem Firmware

"If the iPhone has firmware revision 03.12.06_G or 03.14.08_G, it is using either firmware revision 1.0, 1.0.1 or 1.0.2, and can be hacked to install third-party applications as well as unlocked. If it is running firmware version 04.02.04_G or 04.01.13_G, the device has the updated 1.1.1 firmware revision and cannot be jailbroken to allow third-party application installation nor unlocked."