PwnageTool = You create a custom IPSW and then use iTunes to restore to the IPSW.
redsn0w = You upgrade to the official 3.0 software with iTunes, and then redsn0w jailbreaks your device.
PwnageTool offers a lot more customization, but for plenty of people, redsn0w is all that's necessary. Either one is rather quick and painless though. If you're already running 3.0, I'd use redsn0w, otherwise, go for PwnageTool.