Upgrading the iphone OS is not a tough nut to crack, its very simple and can be done by following the steps given below. But if by chance you want to downgrade then it can become real problem. But it does not mean it cannot be done but its better you read properly what iphone os 3.0 is all about before upgrading, read about it here
• Connect your iphone to the computer and download the latest itunes version 8 if you don’t have it already. You can download it from here
• Once you have connected your phone you will see it under the devices tag in the itunes, select it from there.
• At the bottom you will see a check update button. Click on it to start download the latest updates for your iphone.
• You will the donlwoad progress. Make sure that you do not disconnect the phone until the download is complete.
• Once it’s complete, you are done. Isn’t that simple as I already said.
If you have an ipod touch, the procedure followed will still remain the same but the ipod touch users need to shell out $9.95 for the latest update.