Step 1: Start iTunes and backup everything from Contacts, Calendars, Photos, Videos and Apps if you haven’t already.
Step 2: Update your iPods and iPhones to latest iOS 4.0 or 4.0.1 and iPad to the latest iOS 3.2.1 firmware with iTunes. Download links below.
Step 3: Once you are done with the update, make sure you are connected to a WiFi network.
Step 4: Open Safari on your iPad and navigate to http://jailbreakme.com.
Step 5: “Slide to Jailbreak” to begin the jailbreak process.
Step 6: Wait till the jailbreak tool download the required files..
Step 7: Once the download is completed, it will automatically start the jailbreak process. Just don’t do anything silly at this point. Wait till the jailbreak process is completed.
Step 8: Once done, you will be greeted with the following message.
Step 9: Close the browser and look for Cydia. You should now have it on your device!
Here is the video, showing all the above instructions in detail: