How To Install iOS4 on iPhone 3GS, iPhone 3G and iPod Touch
The newest version of Apple’s iPhone OS – iOS4 is now available for download. You can install it on your iPhone 3GS, iPhone 3G or your iPod Touch.
How to Upgrade iPhone 3GS, iPhone 3G and iPod Touch to iOS4 (iPhone 4 OS)
Download the latest version of iTunes – iTunes 9.2 and install it.
Connect your iPhone 3GS / 3G / iPod Touch to your computer and open iTunes.
Right click on your iPhone in iTunes and click on Back Up to save all your existing data.
In the Summary tab of your iPhone, click on Check for Updates in the version section. If an update is displayed, just download the update and click on Update to install iOS4 on your iPhone 3GS / iPod Touch.
After the install, the iPhone will reboot and you can either set it up as a new device or restore your settings and data from the backup.

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Visual Comparision between iPhone 3GS and iPhone 4…
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