Yes! The iPhone Dev-Team just released a new version of RedSn0w that, guess what, it's able to fully Jailbreak devices running iOS 5.0!
Although their Jailbreak is tethered, the new RedSn0w version supports Jailbreaking on the newest iOS 5.0 firmware from Apple and is compatible with the following devices: The original iPad, iPhone 3GS, iPhone 4 and iPod Touch 3G and 4G. Jailbreaking allows you to install Cydia therefore, you can now enjoy your favorite tweaks, yet again!
What is Jailbreak:
Jailbreaking represents the action that unlocks the ROOT File SYSTEM of the iOS device (and UNIX devices in general) to allow arbitrary code to be executed and the system to be modified. On iOS, Jailbreaking means gaining access to ROOT, patching the Kernel so that the arbitrary code (including custom Apple Logo) is accepted and the signature verification gets skipped. Also, on iOS, Cydia (created by @saurik) is being installed. Cydia is a third-party App Store providing tweaks and apps that won't normally be accepted on the official App Store maintained by Apple Inc.
The legal status of Jailbreaking:
According to a new DMCA update, Jailbreaking is allowed for smartphones.
How to JAilbreak iOS 5.0?
Step 0) Make a Backup of your Data (JUST IN CASE).
Step 1) Download RedSn0w 0.9.9b6 (Windows Version) (MAC Version)
Step 2) Open RedSn0w, Click "Jailbreak", follow the connection tutorial for your iPhone. You will be asked to put your iPhone in DFU Mode (they give clear instructions).
Step 3) After your device is recognized as in DFU Mode, check the case for "Install Cydia", then Click NEXT>
Fromt this part, RedSn0w will do everything automatically. Your phone might reboot quite a few times and might show a Pine Apple Running logo, it is normal.
Step 4) At the end, after you see Done!, Go and perform a TETHERED BOOT by pressing "Just Boot" as int he following ScreenShot
That's it, now your iOS 5.0 device is Jailbroken! Enjoy 🙂