To update, simply launch minecraft it should do it automatically. The recipe for the bed is 3 cloth on top of 3 wood planks.
Here is a list of what else was updated, according to Notch's tumblr:
* Implemented a new lighting engine with the help of MrMessiahs (can be turned off)
* Changed the options around, added a new “Graphics options” button
* Added beds. If all players in a map sleeps in a bed during night, the game immediately skips until morning
* Added three new half-size blocks
* Added Delay/Repeater redstone dust blocks
* Added whitelisting to the server. To use, enter “whitelist
* New save file format, old maps need to be converted (that might take a while..)
* It’s now possible to have more than five save slots, and to rename saves
* Scrollbars in both the texture pack list, and in the map selection screen
* Replaced the Mojang splash image to reflect the new logo colors
* .. and a bunch of bug fixes and tweaks!
If I have time, I'll try and post a video of some of the new stuff. So exciting!