Instructions
Select the "Settings" heading on the PS3 menu and select "System Update" from the top of the sub-menu that comes up.
Select "Update via Internet" on the next menu that comes up. Select the "Download" option on the next screen, and the PS3 downloads the new firmware.
Press the "X" button when the menu asks you to. This installs the new firmware update. During the procedure the PS3 may turn off. Do not turn it back on, because this is part of the firmware upgrade.
Select the "Settings" heading again when the PS3 turns back on. Select the "System Settings" sub-heading.
Check the "Current Firmware" version. It will read the new firmware you just installed. As of July, 2011, the most current firmware is 3.66.