The jailbreak was made possible by Geohot’s Limera1n, and is tethered — meaning the jailbroken device has to be plugged into a computer if there’s a need to reboot.
There are still a good few months before end users can get their hands on iOS 5. An untethered jailbreak could be available by then, judging from past reports.
A small segment of iDevice users don’t update their devices the moment Apple makes it available. They only do so when they are sure that they can re-jailbreak after upgrading.
Why? Because despite all the new features Apple is bundling into every iOS update, it’s still no match for all the tweaks and jailbroken apps available on Cydia. It won’t be significant for users who’ve not jailbroken their device, but once they’ve done so, there’s almost no turning back.
Also, many developers make their apps available on Cydia after being rejected by Apple’s App Store (eg. Grooveshark). Jailbreaking means Apple has no say on what apps you can or cannot have on the phone.