This is what iOS looks like when it's jailbroken. (Notice how all the apps look different).

Jailbreaking is the process of enabling full system access/modification by the user on Apple devices running the iOS operating system through the use of software and hardware exploits – such devices include the iPhone, iPod touch, iPad, and second generation Apple TV.  The name refers to breaking the device out of its "jail", which is a technical term used in Unix-style systems, for example in the term "FreeBSD jail". A jailbroken iPhone, iPod touch, or iPad running iOS can still use the App Store, iTunes, and other normal functions, such as making telephone calls.

Jailbreaking permits root access to the iOS operating system, allowing the download of additional applications, extensions, and themes that are unavailable through the official App Store. Jailbreaking is a form of privilege escalation, and the term has been used to describe privilege escalation on devices by other manufacturers as well. While there are a number of "hacking teams" that leverage privelege escalation to provide root access to the end user, they all tend to install a software package called Cydia, a dpkg front-end developed by Jay Freeman (Saurik). Cydia is an alternative to Apple's AppStore that allows you to use alternative software repositories, and disables App code signature checking. After jailbreaking, you will not be able to update to a new version of iOS unless you restore your device first by using a computer.

In rare cases, jailbreaking can simply "brick" (render permanently unusable) a device. Because it opens up access to all parts of the operating system and disables code signing checks that validate the software hasn't been modified by a third party, software packages from shady repositories, can also inject malicious software into your device.  There is a chance your device may become unusable if an installed package contains malicious code. Basically, jailbreaking an iOS device lowers device security to the level experienced on an Android phone.

Restoring a device with iTunes removes the jailbreak. Jailbreaking has been around ever since the first iPhone was released.

Note that Jailbreaking is not to be confused with Unlocking, which is when a phone that is locked to a specific carrier is modified so that it can be used with any carrier.

What you can do with a Jailbroken Device

If your device has been jailbroken, anything is possible from downloading unapproved apps and third-party software to modifying or replacing the entire iOS operating system. Normal functions used on un-jailbroken devices will still work. Below is a list of stuff you can do with a jailbroken device:

  • Write and install software on your iOS device without having an Apple Developer account
  • Run old console emulators (such as NES and PS1)to play classic games (like Super Mario Bros classic).
  • Modify the operating system.
  • Get Siri on devices that don't have it.
  • Add custom features to the device.
  • Hack games and game save files.
  • Customize app icons.
  • Install software not available on Apple's App Store
  • Install pirated versions of commercial software

What to use

For those who are using iOS 3.1.3 or under will need to use greenpoison. For those who use firmwire over 3.1.3 (which will be iOS 4 and up) will need to use a more recent jailbreak through a tool such as RedSn0w.