Jailbreaking does nothing more than allow you access to the kernel. What that means is that you can install software Apple won't allow into the App Store.
The most useful feature of jailbreaking is free tethering. As you may know, AT&T and Verizon offer tethering plans that allow you to use your cell phone's internet connection with wi-fi capable devices. These plans are generally pretty expensive and simple turn on a feature the phone already has. If you jailbreak your phone, you can download a tethering app (MyWi is my favorite. It's a one-time $20 purchase, but it can be found in Cydia for free if you're willing to look) and cut your provider out of the equation.
Jailbreaking does allow you to install harmful software, but if you use common sense, you're unlikely to do it.
I always suggest using redsn0w. It's dead simple to use, the Dev Team is always quick to crack new firmware releases, and the community is great about offering help if you need it.
All you need to do is go to www.redsn0w.com and download the most recent version (0.9.6rc14). Once it's downloaded, all you need is your IPSW file (in Windows 7 it's located at C:\Users\User Name\AppData\Roaming\Apple Computer\iTunes\iPhone Software Updates [make sure you have hidden files set as viewable]) The program walks you through the rest of the steps.
Enjoy!
