Several security issues are addressed for iPhone OS in this update.  All of them are applicable to iPhone OS 1.0 through 3.1.2, and iPhone OS for iPod touch 1.1 through 3.1.2.  The update will bring your device up to OS 3.1.3

Almost all of the issues addressed are serious - many of them are buffer overflow conditions allowing arbitrary code execution for common iPhone activities:

• watching a maliciously crafted MP4 video
• viewing a malicious TIFF graphic
• accessing a (again, maliciously crafted) FTP site.
• There's also a particularly nasty one that uses a memory corruption issue to bypass the iPhone password (via a crafted USB control message), allowing access to user data on the phone.

These are referenced as CVE-2010-0036, CVE-2009-2285, CVE-2010-0038, CVE-2009-3384 and CVE-2009-2841

These updates are available on iTunes - more information on the issues and update procedure can be found at http://support.apple.com/kb/HT4013 , or the main security update site at http://support.apple.com/kb/HT1222

The recommendation is to update your device to OS 3.1.3 as soon as possible.

=============== Rob VandenBrink Metafore ===================