MuscleNerd used the limera1n exploit that was discovered by Geohot. The jailbreak is currently tethered. We can soon see an untethered iOS 5 Jailbreak, maybe after the final release of iOS 5 this fall. MuscleNerd has managed to get iSSH and Cydia running on his iPod Touch 4G.
Currently, only Apple developers have the access to iOS 5 Beta 1. So, normal users won’t be able to get a bite of this jailbreak for now.