Google has released Android 2.2.1 update for Nexus One owners. It's a minor update and will be rolled out initially for Google Nexus One and soon it will be available for other Android phones via OTA (Over-The-Air) method.
So what is this mysterious update all about? Details about the changes are limited at this moment, but as per few critics the known WiFi issue in Android 2.2 (Froyo) has been resolved and Android security hole which enabled Universal Androot app to root number of Android phones has been fixed. If you want to keep your Android device rooted, DO NOT update to Android 2.2.1 now.
If you have't rooted your Nexus One ever then you'll receive Android 2.2.1 update OTA (Over-The-Air), which means you can update the software online and you don't need to connect your device to the computer, all you need is an internet connection on your Nexus One from your service provider. However, if you have a rooted Nexus One, you'll have to manually upgrade to Android 2.2.1. Both procedures are given below.
How to Update/Install Android 2.2.1 on Nexus One OTA:
If you are on stock (Unmodified Bootloader, Recovery) Android 2.1 or Android 2.2, you should automatically receive a message on your Nexus One's notification bar about software update available for your phone, please note that this will only happen if you phone is connected to internet (GPRS/EDGR/3G/HSDPA etc). Simply download the software update and wait for its installation to complete. Just follow simple onscreen instructions and you'll be good to use it.
If you didn't get the notification on your phone, you can also route to Menu > Settings > About phone > Software updates in your Nexus One and check for any updates available OTA.
How to Download and Install Nexus One Software Manually:
Procedure to update Android 2.2.1 on Nexus One manually is exactly similar to the one given here to update Android 2.2 on Nexus One. Just download Android 2.2.1 firmware built FRG83 (link given below) and follow step-1 to step-9 to update your Nexus One to Android 2.2.1. Please note that this procedure will only work if you have rooted Nexus One.
Do share your Android 2.2.1 experience in the comments section.
Download Android 2.2.1
Update1: Root Android 2.2.1 (FRG83) on Google Nexus One [How-To Guide]