Originally posted by Clatchy
FAQ
What is a Jailbreak?
Jailbreaking is a process that allows iPad, iPhone and iPod Touch users to run any code on their devices, as opposed to only that code authorized by Apple. Once jailbroken, iPhone users are able to download many applications previously unavailable through the App Store via unofficial installers such as Cydia, as well as illegally Pirated apps. A jailbroken iPhone or iPod Touch is still able to use and update apps downloaded and purchased from Apple's official App Store.
Is it illegal?
Hacking the iPod Touch is not illegal. While Apple would like to make you think it is illegal, it is not, and it is impossible to get in any legal trouble for hacking it. You and Apple made an exchange. You gave Apple $400 and they gave you an iPod. It is officially yours and you can do whatever you want with it.
It is illegal to post copyrighted code, such as the operating system of the iPod Touch and the iPhone, on the Internet. But you won't be doing that if you choose to hack your device.