Apple has released iOS 5 for public update. All devices from iPhone 3G can be updated to iOS 5 free of cost. The usual process to update your iOS device to the latest version is to use the latest version of iTunes. You need to connect your iOS device to your MAC or PC and use iTunes to check for updates and you get a notification like the picture given below.

You can select the option you desire, you can select Download and Update if you want the process to be fully automated.

Agree to the terms and conditions and things go on.
If you have problems in Update like many are facing (iTunes could not check for an update to the carrier settings) you need to download the iOS 5 restore file for you device and do the restore – You can find the links for the iOS 5 restore file from the Apple server here and follow the mentioned process.

I have noticed that the error happened to my devices that I was using the iOS Beta Versions and the one that I did not use for development had a very smooth upgrade without any errors. If you have jailbroken your iOS device, then you should find all possible errors and solutions before you do the upgrade.
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