You can find the update here (description of update features at end of this post):
https://www.amazon.com/gp/help/customer/display.html/ref=hp_left_cn?ie=UTF8&nodeId=201064850
However, you may wish to read through at least some of this thread:
http://www.kboards.com/index.php/topic,180546.0.html
talking about the experience some members have had with the update. It's not universally loved, by any means. It appears that, if you have a lot of books that are in multiple collections, you may get a performance hit--slowness and battery life. Still not sure if that's universal.
Be sure that you want to update, because you can NOT remove it once installed. Resetting to factory defaults does NOT remove the firmware update.
I'll also note that I think the Goodreads integration listed below is very limited and kind of lame; the integration between the Goodreads site itself and Amazon that's being rolled out now (another thread) is better.
Betsy
The update page, linked to above, describes the update:
The software update includes general improvements and the following new features:
Kindle FreeTime
FreeTime lets you create personalized profiles for kids, and give them access to titles from your collection of books. Kids can keep track of their personal reading progress and earn achievement badges. To learn more, go to Kindle FreeTime
Goodreads on Kindle
Connect with the world's largest community for readers from your Kindle Paperwhite. See what your friends are reading, share notes, and rate the books you read. To learn more, go to Find and Share Books with Goodreads on Kindle.
Cloud Collections
Use Cloud Collections to organize your content in custom categories. See your collections in a Collections view, and customize where your collections show on your device. To learn more, go to Organize Your Content with Cloud Collections.
Page Flip
While reading, you can skim the book page-by-page, scan by chapter, or skip to the end for a sneak peek without losing your place. To learn more, go to Go To Other Locations in a Book
Enhanced Bookmarks, Highlights & Notes
Access and manage all of your bookmarks, highlights, and notes more quickly and easily. To learn more, go to Bookmarks, Highlights & Notes
Smart Lookup
When you look up a word or character, Smart Lookup provides you with dictionary, X-Ray, and Wikipedia information. To learn more, go to Explore Your Book with X-Ray.
Vocabulary Builder
Words looked up in the dictionary are automatically added to Vocabulary Builder. View the definition and usage of the words, and quiz yourself with flashcards. To learn more, go to Expand Your Vocabulary.
Inline Footnotes
Read the complete text of each footnote inline without changing the page or losing your place in the book. To learn more, go to Go To Other Locations in a Book.