You can update the firmware/system software in two main ways: using Wired/Wireless Internet or using an external storage media. If you have internet configured, the PS3 can download and install the update for you. If the PS3 is not connected to the internet, a USB device can be used to install the update.
If you use a USB device, the “PS3UPDAT.PUP” file should be stored in the folder “/PS3/UPDATE”, i.e. there should be a folder called “PS3” on the root of the device. Within the PS3 folder, there should be another folder called “UPDATE” which should contain the “PS3UPDAT.PUP” file.
Warning: Do not switch off your PS3 or remove the external storage media during an update. Doing so may damage the system software, rendering your PS3 useless. You should use the Recovery Menu if your PS3 fails to start correctly.