Microsoft has released their first update to Windows Phone 7, but unfortunately, it is not the update that everyone has been expecting. Windows Phone 7 users are expecting an update that adds cut, copy, and paste functionality to their phones, along with several other improvements.
Microsoft says that the update is a fix to the update process itself, and is intended to making future updates run smoother. An update page for Windows Phone 7 exists on the Internet for you to bookmark and review for future updates.
If you own a Windows Phone, you should see a notification informing you that an update is available. To update your phone, you need to connect it to a Windows PC running the Zune desktop software or to a Mac running the Windows Phone 7 Connector. Microsoft says that the update is not going out all at once, so I expect that it could take several days before the majority of Windows Phone users receive the update notification.
If you want to be certain that your phone is capable of receiving the update nofication, open Settings, Phone Update and make sure that the two checkboxes on the page are selected. The phone should receive the update notifications via cellular and WiFi connections.