Towards the end of last week US iPhone owners began reporting that an update was available via iTunes. The update which simply described itself as "carrier settings" has since been the subject of many questions.
Apple does have a knowledge base article on such updates but offers no details on what is included in the carrier update.
iTunes 7.7 and later has the ability to update the carrier specific settings on iPhone with iPhone 2.0 software or later. Carrier settings updates are small files (about 10k) that are downloaded from iTunes to be installed on your iPhone. The carrier settings can include updates to the default APN (how iPhone accesses the carrier's cellular data network), special dialing codes at Settings > Phone > [Carrier] Services, default settings for Stocks, Maps, Weather, and other items.
TUAW has got some information on what is included in the update, primarily the update delivers logo replacements. It is suggested that this is in conjunction with the introduction of AT&T's MicroCell service.
Two images, both saying just “AT&T M-Cell”, one in a light font, the other dark. They’re just carrier logo replacements for AT&T’s upcoming cell-tower-in-your-living-room MicroCell - when you’re connected to the MicroCell (or M-Cell, apparently), it’ll show these logos up at the top instead of the default AT&T ones.
Additionally the update reportedly includes settings for the Mobily network (Saudi Arabia) and Etisalat (United Arab Emirates).