The term used to describe hacking an iPhone to install third-party applications not sold via Apple's own App Store.
Historical perspective: According to the EFF, in comments submitted to the Copyright Office, Apple said jailbreaking was a violation of copyright laws. "Current jailbreak hacking techniques use unauthorized modification to the copyrighted bootloader and OS, resulting in infringement of the copyright in those programs," Apple said.
The Digital Millennium Copyright Act (DMCA) says "no person shall circumvent a technological measure that effectively controls access to a work protected under the Digital Millennium Copyright Act, which may apply to jailbreaking."
The jailbreaking of smartphones in the U.S. continues to be legal, according to the U.S. Copyright office, "where circumvention is accomplished for the sole purpose of enabling interoperability of lawfully obtained software applications with computer programs on the telephone handset." However, they refused to extend this exemption to tablets, such as iPads, arguing that the term "tablets" is broad and ill-defined, and an exemption to this class of devices could have unintended side effects.
Jailbreaking a device clearly involves circumventing its technological protection measures, so its legal status is affected by laws regarding circumvention of digital locks, such as laws protecting digital rights management (DRM) mechanisms. Many countries do not have such laws, and some countries have laws including exceptions for jailbreaking.