If you have not connected your iPhone to iTunes lately, notice of iPhone 2.1 availability will be indicated when checking for updates.
All iPhones benefit from this update, with the first iPhone getting the nod. The update to my first generation iPhone went smooth and quick.
In settings, you have to ability to set the preferences for those applications that provide for it. For example: AIM, At Bat, NetNewsWire, and Pandora allow adjusting of their preferences.
What is new in iPhone 2.1
* Decrease in call set-up failures and dropped calls
* Significantly better battery life for most users
* Dramatically reduced time to backup to iTunes
* Improved email reliability, notably fetching email from POP and Exchange accounts
* Faster installation of 3rd party applications
* Fixed bugs causing hangs and crashes for users with lots of third party applications
* Improved performance in text messaging
* Faster loading and searching of contacts
* Improved accuracy of the 3G signal strength display
* Repeat alert up to two additional times for incoming text messages
* Option to wipe data after ten failed passcode attempts
* Genius playlist creation