Apple allow to you download and install version 1.1.3 completely free. The free update which Apple offers, includes a graphical change from the current iPod touch dock image, to the iPhone dock image, and thats it. If you want the five new applications (stocks, notes, weather, maps and mail) plus the privilege of changing your icon order, and adding web bookmarks to the home screen of your iPod (web clips), this functionality costs $20 (£12.66).
To download the update you will need a Apple ID, which you can create by opening iTunes, choosing 'iTunes Store' from the left pane, and clicking 'Sign In' in the top right corner of the store. Once the pop-up box appears, it will have an option to create a new account. New accounts will require either a debit/credit account information, and/or iTunes gift cards to give you account electronic credit.
Hope this helps.
R-Fly