"Players will now have the opportunity to take on Contracts, manage Funds, a new in-game currency that allows players to buy rocket and plane parts, and earn Reputation for their efforts," reads the update's official description. "Reputation is raised for completed contracts and bringing Kerbals back in one piece. Failing missions, or gasp, blowing them up lowers Reputation."
According to Squad, Contracts appear based on a player's reputation. Your space program starts at neutral, then after completing a series of starter contracts the game dynamically generates new contracts which range from testing spaceship parts to rescuing a hapless Kerbal who has become lost in orbit. Complete your mission in time and your reputation will be enhanced, leading to new, more complex contracts.
The First Contract update for Kerbal Space Program is available to players at no charge. For more information, take a look at the immense FAQ Squad has prepared.