These instructions are copied from Apple's website.
To update your iPod touch:
Step One Make sure you have an Internet connection and have installed iTunes 7.4 or later from www.apple.com/itunes. Apple recommends using the latest version of iTunes.
Step Two Connect iPod touch to your computer.
Step Three In iTunes, select iPod touch in the source list and click the Summary tab.
Step Four Click "Check for Update." iTunes tells you if there's a newer version of the iPod touch software available.
Step Five Click Update to install the latest version of the software. Follow the onscreen instructions to complete the update process.
Step Six You can verify the software version installed on the iPod touch by choosing Settings > General > About from your iPod's menu.
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