Most of iPhone 4 users didn't update to iOS 4.2.1 as it updates baseband and make it not unlockable. So in case you got an iPhone 4 on older 01.59.00 baseband, we have been tipped off about a solution for that. The below steps will guide you to update iPhone 4 to iOS 4.2.1 while preserving the same older baseband 01.59.00 and unlock it.
STEP 1: Right click on Notepad from Start - Programs - Accessories, then choose Run as administrator from the contextual popup menu.
STEP 2: Once notepad opens, select Open from the File menu then navigate to C:\Windows\System32\drivers\etc\ and open the hosts file as shown:
STEP 3: Now add 74.208.10.249 gs.apple.com to end of the file as shown in the screenshot below:
STEP 4: Now, you'll have to restore your iPhone 4 to iOS 4.2.1 by clicking on the iPhone icon on the left sidebar of iTunes then hold left “alt” button (“Shift” button on Windows) on the keyboard and click on “Restore” then release the alt button, Now Select the original iOS 4.2.1 firmware.
STEP 5: iTunes should pop-up with some error as error 1013, 1015 or some other error. This indicates that you have done it successfully, hit OK to continue.
STEP 6: Now you iPhone will stuck in Recovery Mode showing the well-known "Connect to iTunes" message. You have to run TinyUmbrella (Windows - Mac) or RecBoot 2.1 for Mac OS X to get out of recovery mode.
You'll now be able to jailbreak your iPhone 4 using Redsn0w 0.9.6 for tethered and Redsn0w 0.9.7 for untethered one then unlock it using Ultrasn0w carrier unlock. [Thanks @AppleBullet for hat tip, via @Ven000m]
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