The first thing you need to do is download the update file on your PC and rename it to 'update.zip'. Then simply connect your DROID to the PC via USB cable and Mount the SD memory card, by going to Notifications bar and selecting 'USB Connected' option. Copy the 'update.zip' file into the root directory of your memory card and then unmount the device from the PC.
Next thing you need to do is powering off the smartphone and hold down the 'X' key on the physical keyboard and while doing so press the power button. Keep both buttons pressed until you see a triangle shape with an exclamation mark displaying on your phone's screen. Then hold the Volume Up button and click on the camera button until you will get a menu. Use the phone's D-pad to select the option to update your firmware with the file you copied on the memory card.
Be patient and wait till the process is finished, as this could take a while. Once over just click the Reboot option and wait for the phone to flash. You will most likely notice that it will take longer this time for the phone to reboot, compared to a normal reboot, but this is how it is supposed to be.
After the phone reboots you can go and check your new firmware's version by going to Settings, scroll to the bottom of the list and click About phone option.