The update addresses SmartGlass standby issues, multiplayer problems when rejoining games, notification glitches, dashboard performance and the console's wireless networking driver. It also updates the TV, system update and content update services.
For consoles in "Instant On" mode, the update will automatically begin downloading in the background once the console is off. Then the box will power down completely and users will have to turn it back on manually for the update to be applied. See the full details from Major Nelson.