In order to jailbreak the iPod Touch 2G, it requires downgrading it with the 2.1.1 firmware, which is code that is signed by Apple. The protections in the iPod 2G will allow that code to run, which actually places the old vulnerability onto the iPod 2G. Then you use the old method to jailbreak it normally.
The updated method, and it's required software will be located at
http://redsn0w.com/ as soon as the new method is further developed and tested.
Correction: You do not have to downgrade your firmware. Apparently, it uses a firmware 2.1.1 file as it's payload delivery system, to sneak past the security measures that exist in the iPod 2G boot sequence. It has been stated that this is a permanent jailbreak method, in other words, ANY firmware upgrade by Apple will not make this new jailbreak method obsolete.