Twitter co-founder Jack Dorsey pulled back the curtain on his new startup today called Square, a mobile payments company.

Square allows anybody with a cell phone or laptop that has a headphone jack to accept credit card payments using a small plug-in dongle, rather than having to purchase costly credit-card processing equipment. As of today, the service is now in a private beta. In a Tweet today, Dorsey (@jack) simply wrote: “Announcing our new company, called @Square, which I’m thrilled to be a part of.” ReadWriteWeb wrote that the company is backed by Khosla Ventures and a team of angel investors. Square’s team of advisors includes actress Alyssa Milano, Susan Wu, Ryan Gilbert, Ted Wang and Twitter investor, Gregg Kid.

Right now, Square is only working with a select group of companies, but it expects to expand in 2010. Square is currently working on the iPhone and iPod Touch. The whole idea is to provide a cheap way for small companies to charge by credit card given the dominance of paying by plastic these days. No word on how much the dongle will cost, but users apparently won’t have to sign any contracts and there won’t be a monthly fee.

On the website, Square lists the benefits of using their platform, which includes sending receipts by email or text message instead of printing them out; using photo verification, Square users can visually confirm you are the card holder; and providing rewards programs, in which Square keeps track of a user’s visit, rather than a punch card. The company will also donate a penny to a cause of your choice with each transaction.