Actually, you can also save your SHSH by using TinyUmbrella, which does NOT require being jailbroken. So anyone currently not jailbroken, or currently jailbroken but staying at 4.0.1 for now, and thinking they may eventually want to be (or who are waiting for it to work for them: me), should either backup SHSH via Cydia (choose the "Make my life easier" option when you are first jailbroken) or download TinyUmbrella and use it to store your SHSH locally (and on Cydia). You can get TinyUmbrella here:
http://thefirmwareumbrella.blogspot.com/
Download links are on the right side of the page. I used this yesterday to backup my SHSH because I'm currently not jailbroken and on 4.1, and I don't want to be forced into a tethered jailbreak later. The trick here is that if you don't store your SHSH blob, then when a new firmware is released by Apple, they stop signing previous ones and you can't install them. If 4.1.1 breaks comex's unthethered hack, then while you'll be able to jailbreak still, you'll be stuck with a tethered jailbreak. When 4.1.1 is out, you'll no longer be able to install 4.1 unless you've got your SHSH blob stored. Now the dev team has said it's unlikely that 4.1.1 would break the untether, but 4.2 is more likely to break it.
As I posted about before, both GeoHot's exploit and SHAtter are actually tethered jailbreaks, but comex came up with a way for it to be untethered on 4.1. It's likely Apple will break that in a future firmware update. You'll be able to be jailbroken always, but it will be tethered unless they can figure out another such hack fix to make it untethered again.
To actually use one of these stored "blobs" you use the TSS Server (part of TinyUmbrella). See the info on that at the bottom of this Read Me:
http://dl.dropbox.com/u/7078752/ReadMe/ReadMe2.pdf
One thing I'm wondering is if it's possible to get your SHSH blobs that are stored on Cydia, and in particular if you currently aren't jailbroken? So you can have them locally. I have 4.0 and 4.0.1 stored on Cydia, but they aren't in TinyUmbrella. TU seems easier to use for restoring, so I'd like to have them there.
EDIT: Malik posted a while back about how you restore to an older firmware for which you have an SHSH blob stored on Cydia, so look for that message. And, yes, I know I need to add all this to the OP!
EDIT2:
[quote name='shosh']hey crunchewy, since you seem like the helpful fella, how do you back up your current firmware before upgrading it? and by doing that are you able to save the current baseband so you can go back to it?[/QUOTE]
I'm not sure about backing up baseband's. I *think* that isn't possible, but don't quote me on it. If you want to retain the ability to unlock (not jailbreak, but unlock for use on other carriers) then you should not update to 4.1 now! You need to wait for PwnageTool to be released, so you can update to 4.1 while retaining your current baseband. To be honest, I'm not real clear on what baseband does for you. Is there any reason you SHOULD update your baseband, or are updates to it just a means of blocking unlocks? Maybe there are some fixes in these baseband updates that you would want if you aren't unlocked? Obviously if you are or wish to be unlocked then you don't want a new baseband, though.
Lastly, my understanding is that the firmware itself you don't really need to backup. You can download the firmware later. Various sites have links to various firmware versions. The trick is you can't actually install the older firmware without having your SHSH blob for it backed up. Having said that, the current firmware (and possibly previous ones) is on your computer. Where depends on whether you're running Mac OS X or Windows.
EDIT3: Ahh, here's the locations for Mac OS X, XP and Vista. I think Win7 is the same as Vista:
Mac OS X: ~/Library/iTunes/iPhone Software Updates
Windows XP: \Documents and Settings\[username]\Application Data\Apple Computer\iTunes\iPhone Software Updates
Windows Vista: \Users\[username]\AppData\Roaming\Apple Computer\iTunes\iPhone Software Updates