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How to Jailbreak iPod Touch OS 3.1.2?
Users who were waiting for jailbreak iPod Touch 3G and iPhone 3GS on firmware 3.1.2 can now use a software to jailbreak iPod Touch OS 3.1.2. The following single software will jailbreak your iPhone 3GS/3G/2G on latest firmware 3.1.2, it can also be used to jailbreak iPod Touch 3G/2G/1G, it is the simplest jailbreak available and it does the job in less than a minute.
I tried it on my iPod Touch 2G and it does the job in just around 30 seconds. Following is the steps to jailbreak iPod touch OS 3.1.2.
Note: Steps are same for Windows and Mac users.
Step 1. Download BlackRa1n RC3 by clicking on the Windows/Mac icon at the bottom of the page and save it on your desktop.
Note: Download BlackRa1n only from the website mentioned above.
Step 2. Now execute the BlackRa1n.exe from your desktop by double clicking on it.

Step 3. Now connect your iPhone or iPod to your PC and hit the make it Ra1n button.
Now your iPhone will go into Recovery Mode. Regular Recovery Mode screen will be replaced with picture of GeoHot.

Step 4. After the BlackRa1n has done its stuff, your iPhone or iPod will Reboot.
Then a Popup will appear telling you that BlackRa1n is a free tool and if you like it you can donate at geohot@gmail.com.

Step 5. Once your iPhone is back ON you will see a BlackRa1n named icon on your iPhone SpringBoard, which means your iPhone or iPod has successfully been jailbroken.
Tap on the BlackRa1n icon on SpringBoard. (Make sure your iPhone/iPod have internet connection.)
Step 6. Now choose your desired installer from the given choices and press the Install button at top-right. BlackRa1n will download your selected package and then install it.
Step 7. Once all done your iPhone/iPod will respring and you will find your selected package icon on SpringBoard.

Recommendation: Transfer iPod to Mac