Addressing recent concerns, Apple also closed the security loophole that allowed certain data to be accessed by bypassing the passcode, and introduced a new option to erase the phone’s data after ten failed attempts to enter the code. Some other features include Genius playlist creation, faster installation of third-party applications, and it’s now much faster to backup to iTunes.
It’s definitely a worthy upgrade, though one can’t help to think that this should have been firmware 2.0. To get it simply connect your iPhone or iPod touch to your computer and click Update in the iTunes Summary tab. The update is free for all iPhone users and iPod touch owners who already bought the 2.0 firmware.