KBAG

Explanation

In Apple's new IMG3 security scheme, they have used something called a KBAG. At the bottom of a firmware file, you will see something that will, on the ASCII side of your hex editor, see "GABK", which is "KBAG" flipped. Look on the hex side and you will the KBAG according to this format:

KBAG Format

KBAG128

typedef struct Unparsed_KBAG_128 {
     char[4]           magic;          // string with bits flipped = "KBAG" (magic = 0x4741424B)
     int         tagFullSize;          // size of KBAG from beyond that point to the end of it
     int         tagDataSize;          // size of just the tag info, not this 0xC "header"
     int  IV_Key_Crypt_state;          // 1 if the key and IV in the KBAG are encrypted with the GID key, 0 if not.
     int            AES_Type;          // 0x80 = aes128 / 0xc0 = aes192 / 0x100 = aes256
     char[16]         Enc_IV;          // IV for the firmware file, encrypted with the gid key
     char[16]        Enc_Key;          // Key for the firmware file, encrypted with the gid key.
} Unparsed_KBAG_AES128;

KBAG192

typedef struct Unparsed_KBAG_AES192 {
     char[4]           magic;          // string with bits flipped = "KBAG" (magic = 0x4741424B)
     int            fullSize;          // size of KBAG from beyond that point to the end of it
     int                unk1;          // 8 less than fullSize. not sure what it is exactly.
     int  IV_Key_Crypt_state;          // 1 if the key and IV in the KBAG are encrypted with the GID key, 0 if not.
     int            AES_Type;          // 0x80 = aes128 / 0xc0 = aes192 / 0x100 = aes256
     char[16]         Enc_IV;          // IV for the firmware file, encrypted with the gid key
     char[24]        Enc_Key;          // Key for the firmware file, encrypted with the gid key.
} Unparsed_KBAG_AES192;

KBAG256

typedef struct Unparsed_KBAG_256 {
     char[4]           magic;          // string with bits flipped = "KBAG" (magic = 0x4741424B)
     int            fullSize;          // size of KBAG from beyond that point to the end of it
     int                unk1;          // 8 less than fullSize. not sure what it is exactly.
     int  IV_Key_Crypt_state;          // 1 if the key and IV in the KBAG are encrypted with the GID key, 0 if not.
     int            AES_Type;          // 0x80 = aes-128, 0xc0 = aes-192, 0x100 = aes256
     char[16]         Enc_IV;          // IV for the firmware file, encrypted with the gid key
     char[32]        Enc_Key;          // Key for the firmware file, encrypted with the gid key.
} Unparsed_KBAG_AES256;

How it works

Basically, it just boils down to using the iPhone / iPod group id key to decrypt Enc_IV and Enc_Key, then using that key and IV to decrypt the DATA section of the file (the code itself).

As an interesting side note, because of the circumstances with the IMG3 format, the Kernel never needs to even touch the gid key anymore, as it's job it to just flash the image to the NOR as is, with container and all.