This update for the iPhone 3.0 OS fixes the OS vulnerability which could allow any hacker to remotely access all the data on your iPhone by just sending you a text message. Although according to some inside news, this update also breaks the Jailbreak for iPhone 3GS and bricks the device so be warned!, Apple is not your friend.
For users who use iPhone in contract with their carrier, they are advised to update right away. However, users who own a Jailbroken iPhone should wait for the iPhone Dev Team to release the specific tools for their device.
Till then, make sure not to accept or open any text messages with square-symbols in it, even from a known contact. This is a text-vulnerability and will cause a hacker to remotely access the data on your phone.