A few days back, iOS 4.2.1 GM was released to developers and it was able to jailbreak the new iOS 4.2.1 using redsn0w. Also, last day, redsn0w 0.9.6 beta 3 was released to support the jailbreak of iOS 4.2.1 GM. But Cydia was yet to be patched. So here is a guide on how to patch and install Cydia on iOS 4.2.1.
1. Jailbreak your device on iOS 4.2.1.
2. Download the Cydia patch given here.
3. SSH into your device.
4. Now copy the patch file to /Applications/Cydia.app/Cydia_.
5. Now type the below given commands in the terminal app on Mac OS X by using the original Cydia binary from here.
mv Cydia_ Cydia.bak
bspatch Cydia.bak Cydia_ Cydia.patch
chmod +x+s /Applications/Cydia.app/Cydia_
6. Reboot your device and Cydia will be working.