These are instructions on how to here.
Create a folder on your desktop called Pwnage
Download from here and place it in the Pwnage folder. Likewise, download the latest 4.3.2 firmware from below and place it in the same folder.
4.3.2 (3G): iPod3,1_4.3.2_8H7_Restore.ipsw
Extract the RedSn0w zip file into the same folder.
Step Two Connect your to the computer and launch iTunes. Select your iPod touch from the list of devices on the left. Now hold down Shift and click the Restore button. Restore is preferred as it won’t create any wasted space on your iPod touch. Navigate to the Pwnage folder on your desktop and select the 4.3.2 firmware ipsw. Click the Choose button to continue.
Once iTunes has finished updating your iPod touch to the desired firmware open the Pwnage folder on your desktop and launch the redsn0w application from the redsn0w folder we extracted earlier. Step Four
Select the 4.3.2 firmware ipsw we placed in the Pwnage folder on our desktop then click Open.
RedSn0w will now guide you through the steps to get into DFU mode. You can find more help with DFU mode here Hold down both the Home button and the Power button for 10 seconds. Release the Power button and continue holding the Home button until RedSn0w detects the device. Step Eleven
Once this is complete you will be notified that RedSn0w is done. Click the Finish button. When your iPod touch finishes rebooting (5 minutes or so) it will be jailbroken with on the SpringBoard. *As usual a big thanks to the Dev-Team and I0n1c for their hard work and contribution to the iPhone community.
**Windows 7 users can try running RedSn0w as an administrator in Windows Vista or XP compatibility mode if you experience any difficulties.