Several iPhone hackers banded together to work on a new jailbreak, and have now released it to the public. Once used, the jailbreak allows you to install 3rd party software on your iPhone or iPod Touch at your discretion. All it takes is visiting a particular website on your iPhone and accepting the install package. From there, you can do nearly anything the unit is capable of – such as installing an SSH daemon or doing clever tricks such as enabling drag-an-drop file transfers directly to your phone's storage:
If you'll want to ssh into your unit, install the BSD subsystem, Community Sources, and then install Open SSH--you may need to upgrade Installer.app (thanks Ste). With Open SSH and sshfs (part of Mac Fuse), you can open Finder windows that offer direct drag and drop access to your phone or touch.
That's definitely some cool stuff. While the amount of 3rd party development exclusively for the iPhone or iPod is limited at best, due to their base system there is a lot of portability possible.
Of course, come next firmware update we may have another fiasco all over again with bricked iPhones, and if you are willing to wait Apple says official support is just around the corner. Regardless, it's a cool hack.