The iPhone 2.1 software update contains many bug fixes and improvements. To get it, connect your iPhone to your computer using iTunes 8 and click Check for Update.

Update includes:

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