Apple has released the 3.0.1 iPhone firmware update today, stating the following:
We appreciate the information provided to us about SMS vulnerabilities which affect several mobile phone platforms. This morning, less than 24 hours after a demonstration of this exploit, we've issued a free software update that eliminates the vulnerability from the iPhone. Contrary to what's been reported, no one has been able to take control of the iPhone to gain access to personal information using this exploit.
The only new feature provided in the 3.0.1 update is that it fixes the SMS vulnerability. We're not sure what exactly the vulnerability is, but it could allow hackers to sieze control of your iPhone's GPS functionality (telling them where you are), access the microphone (for eavesdropping), and turn the handset into a botnet for spamming or DOS attacks. Scary stuff. Read more here.
The update is available now, so go ahead and update whenever you're ready. Just open iTunes and connect your iPhone, the rest will be automatic.