Thanks to recent reports about the new software update to the phone, there seem to be at least three distinct failure modes with two of them being fairly easy to fix. According to company estimates, about 10% of users attempting to update their software encountered a problem. Of those 10%, however, nearly half failed the update because they had a poor connection to the internet or lacked enough disk space.
Apparently, the update makes a backup of the phone's contents in case something awful happens. Everybody else probably falls under the issue affecting "a small number" of Samsung devices, an issue the company is working furiously to fix. In the meantime, the update has been turned off for those devices.
In lay terms, when you get the prompt to install your update, Microsoft will send you a nice message that recommends that you have the necessary hard drive space on your PC as well as a strong connection to the internet. Around 90% of users were successful in installing the update which is excellent news considering this is the very first update for the device.
Source: Engadget - Microsoft details Windows Phone 7 update problem, 'small number' of Samsungs affected