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A new tool called Sn0wbreeze has been released for jailbreaking iPhone 3G, 3GS and also the old 2G version with the latest 3.13 firmware. For iPhone 3GS users there is a bit of bad luck that this willwork only if they have the older bootrom (non-MC model). Here is how to jailbreak iPhone 3.13 firmware on iPhone.

1. Download the Get the latest version of iTunes.
2. Start iTunes and do  a sync with your pc, so that you have a complete backup with you.
3. Get Sn0wbreze and the 3.13 iPhone OS version (Download iPhone 3.1.3 firmware for iPhone 2G, Download iPhone 3.1.3 firmware for iPhone 3G, Download iPhone 3.1.3 firmware for iPhone 3GS ).
4. Start Sn0wbreeze and choose Simple Mode.
5. When Sn0wbreeze asks you for the custom firmware version, choose the downloaded firmware.
6. Click "Yes” when Sn0wbreeze asks you "Do you want to activate your iPhone?” for activation. Click on "No” if you are on an officially supported carrier like AT&T.
7. Now you will get the jailbroken custom ipsw file. Now save the file.
8. Now when you connect your iPhone 3G, 3GS with your pc, Enter the Recovery Mode and then launch iTunes and Hold Shift KEY while clicking on the Restore button in iTunes.
9. Now Point to the file you got from Sn0wbreeze software (the jailbroken one). Now iTunes will install the new custom jailbroken firmware.
10. After that you can now safely restore your music, wallpapers etc with the backup you have created first. That’s it!

Do this at your own risk! Also not that jailbreaking iPhone breaks its warranty.